Back to Resources

Preferred Pharmacy Networks and Their Impact on Part D Premiums

Reports

Members in plans without preferred pharmacy networks pay twice as much in premiums; absent those networks, federal spending would be $4.5 billion higher each year

Washington, DC – Preferred pharmacy networks in Medicare Part D plans keep premiums stable and reduce drug prices at point of sale for millions of seniors. If Part D plans were unable to establish preferred pharmacy networks, federal spending on Medicare Part D would be $4.5 billion higher per year, according to a new report out today from Oliver Wyman, commissioned by the Coalition for Affordable Prescription Drugs (CAPD). The report projects that federal spending on Medicare Part D would be roughly $45.8 billion higher between 2018 and 2026, if preferred pharmacy networks were not an option for Part D plans.

The report analyzes the impact of preferred pharmacy networks in the Medicare Part D program. Key findings include:

  • Ninety-nine percent (99%) of seniors in individual stand-alone Part D plans enrolled in plans with preferred pharmacy networks;
  • Between 2011 and 2018, the number of individual Part D plans that included preferred pharmacy networks grew from 7 percent to 98 percent;
  • Seniors enrolled in plans without preferred pharmacy networks pay twice as much in premiums; and
  • Plans that adopted a preferred pharmacy network in 2018 realized an average premium decrease of $14 per member per month, leading to an annual savings of $168 for those beneficiaries.

“Preferred pharmacy networks drive real savings for seniors enrolled in Medicare Part D plans, both in point-of-sale discounts at the pharmacy counter and on monthly premiums,” said Meghan Scott, CAPD Executive Director. “If preferred pharmacy networks are disrupted, millions of seniors will see higher premiums when they renew their prescription drug coverage this October.”

The report comes as The Centers for Medicare and Medicaid Services (CMS) considers changes to the Any Willing Pharmacy provision of Medicare Part D. Those changes could severely constrain Part D plan sponsors and their pharmacy benefit manager (PBM) partners in tailoring preferred pharmacy networks that drive best practices in quality, fraud, waste, and abuse prevention, and lower costs for seniors and the government in the Part D program.

Preferred pharmacy networks help to ensure quality and cut down on waste, fraud and abuse, while saving seniors money on premiums and at the pharmacy counter. Seniors enrolled in plans without preferred pharmacy networks spent more than twice as much on monthly premiums in 2017. If a plan adopted a preferred pharmacy network in 2018, the average member premium decreased by $14 per member, per month, leading to an annual savings of $168 for plan members.

Since 2011, the number of individual Part D plans that included preferred pharmacy networks grew from 7 percent to more than 98 percent in 2018, indicating the importance of this option to seniors as they make their plan decisions each year. More than 21 million seniors are currently enrolled in stand-alone Part D plans with preferred pharmacy networks.

Savings generated by preferred pharmacy networks not only benefit seniors enrolled in Medicare Part D, but also benefit the government, which funds a significant portion of the program.

Without preferred pharmacy networks, the report estimated that government spending on direct subsidies would have been $47 higher, per member per year, and federal reinsurance costs would have been $163 higher, per member per year, for a total increase of $210 per member per year. With 21 million beneficiaries enrolled in stand-alone Part D plans, federal spending would be roughly $4.5 billion higher annually if preferred pharmacy networks were not an option.

The full report can be accessed and downloaded here.

For more information about CAPD and what its members are doing to help ensure access to safe, effective and affordable mediations, visit www.affordableprescriptiondrugs.org.

 

#  #  #

 

Follow CAPD:
Twitter: @RxDrugCoalition
LinkedIn: https://www.linkedin.com/company/coalition-for-affordable-prescription-drugs/