Leveraging pharmacy networks to drive down health care costs

A recent study by the Centers for Medicare and Medicaid Services (CMS) looks at preferred pharmacy networks in Medicare Part D and finds that in the vast majority of pharmacies in preferred networks, drug costs are lower than in non-preferred pharmacies.  

Specifically, the CMS study shows that the negotiated pricing for the top 25 brands and 25 generics in Medicare Part D at preferred retail pharmacies is lower than at non-preferred network pharmacies; 49 out of 50 of the drugs examined by CMS have lower average negotiated prices at preferred pharmacies and, on average, negotiated prices at preferred pharmacies, including mail-service pharmacies, were 3 percent lower for brands and 11 percent lower for generics.

It should be no surprise then that Avalere Health finds that the top five Medicare Part D plans with the lowest average premiums all include preferred pharmacy networks. The research also shows that of all Part D plans with national or near-national status, seven of the top 10 with the lowest average premiums have preferred pharmacy networks.

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In addition, a national poll conducted by Hart Research Associates shows seniors in plans with preferred pharmacy networks are overwhelmingly satisfied, citing lower costs and convenient access to pharmacies, among other benefits. The survey reveals that 80 percent of those in preferred pharmacy plans—which translates to over 7 million seniors— would be very upset if their plan was no longer available in the future.

A recent Wall Street Journal article describes how the health plans in the Exchanges will also create networks to control costs and lower premiums. An HHS spokeswoman said, “plans will compete side by side, and consumers can compare based on the factors that are important to them to find the plan that best fits their needs and budget.”

And consumers should take note of a recent article in Consumer Reports that states: “If your insurance company has a preferred pharmacy, you definitely want to shop there because you could see some pretty big deals. If they have a mail-order program, you may want to check that out, too, because you could see some savings there as well.”

As policymakers continue to look for ways to bring down health care costs, specifically drug costs, they should encourage greater use of preferred pharmacy networks.

Merritt is president and CEO Pharmaceutical Care Management Association.

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