The Debate Over Limited Network Pharmacies

Multiple studies and white papers have come out recently arguing that allowing health plans to restrict members to limited pharmacy networks brings down costs. Opponents worry about taking away the consumers’ choice to visit their independent community pharmacy.

According to a white paper from the National Center for Policy Analysis (NCPA), unnecessary regulations against limited pharmacy networks will increase prescription drug costs. NCPA Senior Fellow Devon Herrick said, “Heightened regulatory scrutiny will prevent drug plans managers from holding down costs for consumers with programs such as creating exclusive networks and encouraging mail-order prescriptions.”

Herrick says that some states are enacting laws that restrict drug plans from offering lower prices for mail-order prescriptions in order to benefit local community pharmacies.  Some drug plan sponsors use formularies to determine which drug therapies are appropriate and often discourage certain drugs or encourage generics.  Dispensing fees are much higher for state-managed plans resulting in higher compensation to pharmacies, he said.

Independent pharmacies sued New York State to stop the state from steering Medicaid recipients to mail-order delivery of certain drugs, which the state Pharmacists Society claims violates patients’ rights and threatens neighborhood drugstores.

A study by Milliman finds that, for the limited pharmacy network to succeed, plan members must find it in their best interest to use the preferred outlets for their prescription drug needs. When a preferred pharmacy is geographically convenient for a member, it may be easy. In other cases, a member might object to shopping at a given pharmacy if others outside the network are more easily accessible or they prefer these pharmacies for some other reason. In the latter case, a plan will need to include a meaningful copay differential to change members’ behavior. The resulting copay differential may offset any enhanced discounts and actually increase plan costs. As a result, the large national chains may be poorly suited for a national limited-pharmacy network unless members have another choice, according to Milliman. The upside of having limited pharmacy networks will vary depending on the strength of existing pharmacy contracts. Larger PBMs have been more successful in negotiating strong contracts with national pharmacies without having to go the limited-network route, reducing their potential upside relative to smaller PBMs.

Seniors have serious concerns regarding mandatory mail order pharmacy requirements in prescription drug plans, according to a survey of 669 Medicare Part D beneficiaries by the National Community Pharmacists Association (NCPA). Sixty-three percent are fearful of losing access to the pharmacy of their choice if they are required to use mail order. Seniors also expressed concerns about using mail order pharmacies, including running out of their medications; not getting prescriptions in a timely manner; having their medications lost, stolen or damaged; and not being able to consult with a pharmacist whom they know and trust. For more information, visit www.ncpa.orgwww.ncpanet.org, or Milliman.com.

Last Updated 8/2/2017

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