Medicare Part D is the rare program that is affordable for both consumers and the federal government. Preferred pharmacy networks, which reduce costs, are a key contributor to the program’s overall success as these networks sift out drugstores that demand higher rates than nearby competitors.
Unfortunately, officials at the Centers for Medicare & Medicaid Services are considering regulating drug plans’ ability to create networks of preferred pharmacies. This would increase costs, limit choices, and disrupt a drug plan option that seniors are flocking to in droves.
While preferred physician and hospital networks have long been used to reduce costs, there is a growing understanding of how networks lower pharmacy costs, too. Currently there are more drugstores in the U.S. than McDonald’s, Burger Kings, Pizza Huts, Wendy’s, Taco Bells, Kentucky Fried Chickens, Domino’s Pizzas, and Dunkin’ Donuts combined, creating an environment ripe for more competition.
During the Medicare prescription drug benefit’s open enrollment season, it is expected that America’s seniors and disabled will again make drug plans with lower cost pharmacy options the most popular plans in the program. According to a recent analysis of Part D data, more than 70 percent of Medicare Part D plans will include a preferred pharmacy network in 2014.
Now a new actuarial study demonstrates that pharmacy networks save the government money. The study—conducted by the actuarial firm Milliman—estimates that preferred pharmacy networks will reduce federal Medicare Part D costs up to $9.3 billion during the next 10 years.
The new study also found the largest two-year decrease in federal direct subsidies in the history of the Medicare prescription drug program has coincided with the rapid adoption of preferred pharmacy network plans and the increased use of generic drugs.
The bottom line is that Medicare Part D is working and preferred networks are a big part of the success story. Policymakers should be wary of new regulations that hurt seniors’ access to lower cost preferred pharmacies. Now is not the time for new health care regulations that would only increase costs, limit choices and do nothing to improve adherence.
Merritt is president and CEO of Pharmaceutical Care Management Association.