March 10, 2014


A new actuarial study released by The Pharmaceutical Care Management Association (PCMA) examining the impact proposed changes to the Medicare prescription drug program finds that eliminating preferred pharmacy networks in Part D would increase premiums by approximately $63 annually for over 75 percent of Part D enrollees and raise overall program costs by an estimated $24 billion over the next 10 years.

“CMS’ proposal to eliminate preferred pharmacy networks will make it harder and more expensive for seniors to access prescription drugs,” said PCMA President and CEO Mark Merritt.

The study examines the sections of CMS’ proposed rule on preferred pharmacy networks. Currently, more than 75 percent of Part D beneficiaries are enrolled in plans that feature preferred pharmacy networks.

Key findings from the study, which was sponsored by PCMA and prepared by Oliver Wyman, include:

  • As of February 2014, more than 75% of prescription drug plans (PDP) enrollees are in plans with preferred pharmacy networks and these enrollees could be adversely affected by the elimination of plans utilizing preferred pharmacy networks.
  • The preferred pharmacy networks provision would increase premiums for the affected population by an average of approximately $63 per year for the 2015 plan year.
  • The rule could increase cost sharing among PDP enrollees by an average of $80 to $100 per year.
  • Since the rule would inflate the national average benchmark for Part D plans, CMS would pay an estimated additional $64 in direct subsidies per beneficiary per year in 2015, for a total increased payment of nearly $1.5 billion in 2015 across all PDP enrollees, based on Part D enrollment of approximately 23 million beneficiaries.
  • Over a 10-year period, the increased cost of eliminating preferred pharmacy networks is estimated to be approximately $990 per affected enrollee, and the cost would be approximately $24 billion to CMS in the form of higher direct subsidy payments.

Oliver Wyman’s findings are generally consistent with a separate Milliman analysis that found the entirety of the proposed rule will increase Part D costs by up to $1.6 billion in 2015.

In addition, a recent poll found that seniors in plans with preferred pharmacy networks are overwhelmingly satisfied, citing lower costs, convenient access to pharmacies and other benefits, according to a survey from Hart Research Associates. The survey found that 85 percent of seniors surveyed are satisfied with their preferred network plan. In addition, the survey found that four in five seniors would be disappointed if their preferred network plan is eliminated.

The Medicare Payment Advisory Committee has warned CMS that the proposed changes to preferred pharmacy networks could lead to disruptions in beneficiaries’ access to medicines.