Proposed Medicare prescription drug reform: It is all about competition

The multibillion dollar drug companies, insurers and PBMs have ramped up the fear machine to claim that the proposed reforms of Medicare Part D will destroy the Medicare prescription drug program by cutting off access to seniors and drastically raising costs to the program, plans, and beneficiaries. None of that is even close to the truth.

Let’s stop the fear-mongering tactics by opponents of the CMS’ well conceived reform.  Here’s the  reality.  With an estimated cost savings of nearly $1.3 billion over the next five years while also providing increased transparency to beneficiaries and payors, CMS’s proposed regulations will increase competition, access and service for seniors. And these reforms start will assuring seniors have access to their pharmacy of choice through an appropriate definition of “any willing pharmacy.”

{mosads}Let’s focus on that one reform – improving pharmacy access.  You do not need a Ph.D. in economics to figure out how consumers are better off with access to a broad range of pharmacies.  Open access will increase patient choice and force pharmacies to compete aggressively for patient layolaty especially through the types of service seniors and disabled need so vitally.

Open access is also what Congress intended when it passed Part D. The Act provided that prescription drug plans must allow participation by any willing pharmacy.  The purpose of this provision was to ensure that all pharmacies that met the terms and conditions of a prescription drug plan’s contract could provide services to the plan’s beneficiaries.  In 2006, after continuous lobbying from pharmacy benefit managers (PBMs), CMS introduced regulations allowing for the creation of preferred pharmacy networks.  The preferred pharmacy networks allowed prescription drug plans to contract for lower drugs costs, hopefully thus lowering costs to the program.  However, using the wording of the 2006 regulations, PBMs and mega-retailers designed restricted networks for plans that eliminated the usage of community pharmacies instead promoting large retail chains and PBM-owned mail order services. 

In response to growing concerns over these costly, limiting networks restricting access for seniors, CMS has proposed regulations that will guarantee fair competition without raising costs to seniors, plans, or the Medicare program by one dime.  If approved, the new regulations will ensure two things: (1) that plans may continue to have preferred cost sharing contracts with pharmacies, and (2) any pharmacy that meets the terms and conditions of the contract can participate.  Thus, CMS has brought competition to the Medicare prescription drug market. 

Ensuring fair competition for American small businesses and choice for consumers is the lifeblood of the American economy..  The majority of pharmacies that are restricted from participating in preferred networks are small businesses.   They not only act as a dispenser of medications, but are also on the frontlines serving patients as healthcare providers.  They deliver increasingly valuable patient services such as immunizations, medication therapy management, and drug adherence.  By eliminating them from the network, plans and PBMs are denying seniors and the disabled adequate access and choice.  

CMS’s proposed changes also have bipartisan support.  Along with recent letters by Republicans Reps. Mike Rogers (Ala.) and Lynn Westmoreland (Ga.) backing the proposed regulations, a number of other congressional members from both parties have long supported competition within Medicare prescription drug plans by allowing participation by any willing pharmacy.  Furthermore, CMS found that these changes will not lead to increased costs, a decrease in services, or a lack of pharmacy access.  Therefore, the knee-jerk reaction by opponents to these regulations can be summed up simply, a fear of competition.

The proposed regulations will ensure that beneficiaries, without paying any more money, will have increased access and choice.  To retain customers, pharmacies will have to compete on quality of care and services offered.   CMS’s proposed regulations allow the free market to determine winners and losers.  Ensuring fair competition; that is what this is all about.   

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


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