How can preferred networks provide savings?

Types of Pharmacies

Types of Pharmacies

Consumers have many pharmacy choices according to data from the CMS National Provider Identifier (NPI) Registry. There are currently 66,814 community/retail pharmacies in United States. Most PBM national networks contain more than 64,000 pharmacies, or approximately 96% of all pharmacies.

The four major types of community/retail pharmacies include chains (e.g., CVS, Walgreens), independents, supermarkets, and mass merchandisers (e.g., Wal-Mart, Target, Costco). This variety of community/retail pharmacy options is augmented by additional dispensing options for consumers, such as mail-service pharmacies, specialty pharmacies, and hospital outpatient pharmacies.

Access to Pharmacies

Access to Pharmacies

Visante completed an analysis of pharmacy access for Medicare Part D beneficiaries based on data from Quest Analytics, whose software is widely used to evaluate pharmacy network adequacy. Visante evaluated this data measuring average travel distance to retail/community pharmacies for the top ten Medicare Prescription Drug Plans (PDPs) by enrollment that offer preferred pharmacy options.

For purposes of measuring pharmacy access, CMS breaks Medicare beneficiaries into three geographic categories: urban, suburban, and rural. According to the data from Quest Analytics, the approximate share of Medicare beneficiaries in each of these three categories is:

  • Urban: 30%
  • Suburban: 20%
  • Rural: 50%
Savings Opportunities

Savings Opportunities

Plans with preferred pharmacy options first appeared in Medicare Part D in 2011. With preferred pharmacy options, beneficiaries can still use virtually any pharmacy in their area, but are able to reduce their copay if they use a preferred pharmacy.

Preferred pharmacies offer lower copays/cost sharing than other network pharmacies. While copay savings at preferred pharmacies varies by the type of prescription, on average a beneficiary can save $5–$10 on each of their monthly prescriptions.

The average Medicare beneficiary takes about four prescriptions per month, and therefore can save about $20–$40 on their monthly copays by using a preferred pharmacy.

Overall Savings for Medicare

Overall Savings for Medicare

CMS released an analysis of preferred pharmacies in Medicare PDPs in July 2013, having examined March 2012 claims from thirteen Medicare Part D PDPs with preferred pharmacies. On average, preferred pharmacies had average weighted unit costs that were about 6% less expensive than other network pharmacies. The four biggest plans, accounting for 93% of claims, had average unit cost savings of 8% at preferred pharmacies.

Convenient Pharmacy Options

Convenient Pharmacy Options

Visante examined the average traveling distance to preferred pharmacies for the top ten PDP’s (based on 2014 enrollment) that offered preferred pharmacy options. By calculating the average distance to the closest pharmacy—for all Medicare beneficiaries and all preferred pharmacies nationwide—they found the average distance for Medicare beneficiaries to their nearest preferred pharmacy is about 4.85 miles.

Visante then looked at the average distance for the three standard groupings of beneficiaries (i.e., urban, suburban, rural), and found the following:

  • Urban beneficiaries: The average Medicare beneficiary living in an urban area travels 1.8 miles to reach the nearest preferred pharmacy
  • Suburban beneficiaries: The average Medicare beneficiary living in a suburban area travels 2.2 miles to reach the nearest preferred pharmacy
  • Rural beneficiaries: The average Medicare beneficiary living in a rural area travels 8.1 miles to reach the nearest preferred pharmacy

Along with preferred retail pharmacies, most Medicare beneficiaries have the option of using a mail-service pharmacy to reduce their copay and have their prescriptions delivered to the home.

Reduced Cost Sharing

Reduced Cost Sharing

Preferred and mail-service pharmacies not only reduce out-of-pocket expenses for beneficiaries, but other research indicates that overall average prescriptions costs are less through preferred pharmacies and that Part D plans offering preferred pharmacy options have lower average premiums.

In short, Medicare beneficiaries typically have access to nearly all pharmacies, as well as the option of using a convenient preferred retail pharmacy or a mail-service pharmacy to save themselves and the Medicare program money.

Resources & References

Resources & References

Medicare Part D Plans Provide the Average Beneficiary Convenient Access to Preferred Pharmacies with Significant Savings, Visante, December 2014.