Impact of the Elimination of Preferred Pharmacy Networks on the Medicare Part D Program

On January 10, 2014, CMS published proposed rules to regulate the Medicare Advantage and Medicare Prescription Drug Benefit (Part D) programs. The health plans and pharmacy benefit managers (PBMs) that are responsible for designing and managing Part D plans have concerns that these rules will adversely affect the ability to develop preferred pharmacy networks. This is important to both Part D enrollees and CMS because the implementation of preferred pharmacy networks has had a significant impact on lowering the cost to provide prescription drug benefits delivered through Medicare Part D.

The Pharmaceutical Care Management Association (PCMA) engaged Oliver Wyman to prepare this report and provide an analysis of the impact of the elimination of preferred pharmacy networks on the Part D program. The plans that currently use preferred pharmacy networks are generally the lowest cost plans in the Part D program, and these lower costs are a result of Part D plans ability to negotiate better drug pricing in negotiations with these pharmacies. Therefore, the elimination of preferred pharmacy networks will increase the cost of Part D plans for enrollees, through higher premiums and cost-sharing, and will increase the cost to CMS, through higher direct subsidies.

Impact of the Elimination of Preferred Pharmacy Networks on the Medicare Part D Program

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