Providing real pharmacy competition under Medicare

Last week, the Centers for Medicare and Medicaid Services (CMS) decided to withdraw parts of a proposal to reform and clarify numerous aspects of the Medicare Part D program. 

Unfortunately, enmeshed in the politically motivated withdrawn portions of the regulation was the proposal to restore key provisions in Part D to give seniors and the disabled access to any willing pharmacy. CMS’s clarification of the meaning of any willing pharmacy (AWP) under the law would have reinstated Congressional intent, led to increased competition, reduced cost and greater pharmacy access, service and choice for seniors and disabled individuals.

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What’s this all about? Let’s use college basketball’s March Madness to illustrate the problem.  When Congress enacted Part D it wanted the broadest range of pharmacies to compete for consumers – recognizing competition would lead to the lowest costs and best service.  A few years ago CMS permitted “preferred networks” allowing plans to restrict beneficiaries to one or two pharmacies or perhaps just mail order based on the belief there would be cost savings.  The result – CMS and other studies found the promise of savings was unfulfilled and often seniors and CMS paid more.  Furthermore, in contravention to Congress’ intention for Part D competition among pharmacies has become almost non-existent since very few pharmacies are given the opportunity to bid to participate in these preferred networks.

Moreover, for many beneficiaries, especially those in rural areas, seniors are being forced to travel great distances to get their drugs at big box retailers, rather than their trusted local community pharmacy. For example, seniors in Florence, Oregon live within one mile of five community pharmacies, but must travel 40 miles to reach a “preferred” pharmacy in either the Humana Enhanced or Humana Preferred Rx drug plans, the National Community Pharmacists Association found.

Permitting highly restricted networks is like the NCAA restructuring college basketball playoffs so only one or two teams got to play and the winner was always the team that provided the biggest side payment.  That would be a March Madness no one would enjoy.

Lost in the debate about the broader Part D proposal was the compelling case for providing stronger pharmacy access by correcting the AWP provisions. 

First, CMS permitted preferred networks based on the assumption of cost savings, but it found that cost savings were inconsistent and actually higher in a few preferred pharmacy networks.  CMS found that “the retail pharmacies in the non-preferred network were actually offering savings…at prices below those offered by pharmacies with preferred cost sharing.”  Consumers and CMS paid more – a compelling reason for reform.

Second, it is clear that broad pharmacy access is what Congress intended when it enacted Medicare Part D. The Medicare Modernization Act provided that prescription drug plans must allow participation by any willing pharmacy.  This only makes sense in dealing with America’s most vulnerable populations, elderly and disabled individuals.

Third, greater access to open pharmacy networks is needed now in a time when Part D beneficiaries need increased provider involvement. Pharmacists are the most trusted and accessible health care professionals and in the integrated delivery models envisioned by health care reform they will be the point guards in assuring proper medication utilization as described in a recent New American Foundation report: “allowing beneficiaries open access and the ability to choose between numerous pharmacies which offer valuable services will improve health outcomes, costs, and beneficiary satisfaction. Removing or restricting community and specialty pharmacies from a network at the expense of patients is not in their best interest nor is it what Congress intended.”

Not surprisingly, major national consumer groups and unions all came out in strong support of CMS’s proposed changes to any willing pharmacy rules.  These groups included, among others, Consumers Union, National Consumers League, Consumer Action, US PIRG, AFSCME, SEIU, Medicare Rights Center, the Leadership Council on Aging Organizations (consisting of approximately 70 of the leading elderly and Medicare rights advocacy organizations).  As the Medicare Rights Center observed the current system of “preferred networks” permits plans to effectively force consumers and CMS to pay more and reduce consumer choice.

Most notably not a single consumer group came out in opposition to providing greater pharmacy access.  Not a single one.

Congress and CMS should listen to that message.  Consumer groups, senior groups and payors such as unions have spoken out in favor of competition and choice.  CMS should enact these reforms as soon as possible to preserve the promise of the Medicare program.

Balto is an antitrust attorney and former policy director at the Federal Trade Commission

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