Expressing concerns about patient access and costs, 16 senators have called on the Centers for Medicare & Medicaid Services (CMS) to take a closer look at the rising use of preferred pharmacy networks in Medicare Part D.

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Senators seek more scrutiny of preferred networks

May 14th, 2013

WASHINGTON – Expressing concerns about patient access and costs, 16 senators have called on the Centers for Medicare & Medicaid Services (CMS) to take a closer look at the rising use of preferred pharmacy networks in Medicare Part D.

The bipartisan group of senators has asked CMS in a letter to ensure that preferred networks are implemented in line with statutory requirements focused on meeting beneficiary needs.

"As CMS reviews Medicare plans for 2014 approval, we ask for additional oversight of Medicare plans with preferred networks," the nine Republican and seven Democratic senators wrote to Marilyn Tavenner, acting administrator of CMS. "Please review the agency's plans to ensure preferred networks are implemented in a manner that is consistent with the Medicare Modernization Act. We respectfully request that you inform us of your findings and of steps that have been put in place to ensure Medicare plans using preferred networks are providing high-quality care for Medicare beneficiaries while maintaining access to prescription drugs and not increasing overall Medicare costs."

Those signing the letter include Sens. Sherrod Brown (D., Ohio); John Thune (R., S.D.); Tom Coburn (R., Okla.); Thad Cochran (R., Miss.); Richard Durbin (D., Ill.); Michael Enzi (R., Wyo.); Chuck Grassley (R., Iowa); Heidi Heitkamp (D., N.D.); John Hoeven (R., N.D.); James Inhofe (R., Okla.); Tim Johnson (D., S.D.); Amy Klobuchar (D., Minn.); Jeff Merkley (D., Ore.); Jerry Moran (R., Kan.); Jon Tester (D., Mont.); and Roger Wicker (R., Miss.).

"The Medicare Modernization Act allows private Medicare plans to create networks of preferred pharmacies and reduce co-payments to beneficiaries to encourage them to utilize these pharmacies," the senators stated in the letter. "By law, preferred pharmacy networks must not increase Medicare costs or discourage beneficiary enrollment."

CMS' "call letter" for the 2014 plan year raised concerns about preferred networks, including the potential for disruption in beneficiary access and increased costs to the Medicare program, according to the senators.

In the call letter, CMS noted its review of drug cost data that found some costs "may be higher in preferred networks than in nonpreferred networks in some plans." CMS also affirmed that "beneficiary communications concerning preferred networks must be clear and unambiguous" and that "under no circumstances may sponsors inform [Low-Income Subsidy] LIS-entitled beneficiaries that they must fill prescriptions at preferred network pharmacies in order to get LIS co-pays."

The National Community Pharmacists Association and the National Association of Chain Drug Stores have called lawmakers' attention to questions surrounding preferred networks, particularly their impact on patient access to pharmacies and their cost levels.

"We appreciate the focus and leadership that the senators are bringing to this important issue for Medicare beneficiaries," NCPA chief executive officer B. Douglas Hoey and NACDS president and CEO Steve Anderson said in a joint statement. "Momentum continues to build within CMS itself and on Capitol Hill behind the need for increased oversight and scrutiny of preferred networks in Medicare Part D, and we appreciate the work of legislators and agency officials alike who are keeping their eye on the ball of meeting beneficiary needs."

In March, 31 members of the House of Representatives wrote to CMS expressing concerns similar to those described by the senators and by the agency.

Under preferred pharmacy drug benefit plans, most pharmacies can participate as network pharmacies to meet Medicare's geographic access requirements, yet only a limited number of pharmacies are designated as "preferred" pharmacies and are authorized to offer the plan's lowest advertised co-pays, NCPA noted when the representatives sent their letter to CMS.

What's more, the association explained at the time, most plans don't allow independent pharmacies to participate as a preferred pharmacy in their network, and the rising number of preferred pharmacy plans is challenging for seniors in rural areas, where independent or regional pharmacies are often the closest pharmacy and the nearest preferred pharmacy may be 20 miles or more away.

An analysis by NCPA also indicated that preferred pharmacy plans may actually be more expensive for the Part D program and consumers.

Still, preferred networks have steadily gain tractioned in the marketplace. According to Adam Fein, president of the Drug Channels Institute and its parent Pembroke Consulting, a pharmaceutical industry consultancy, government and commercial payers are moving away from open pharmacy networks to save money.

"America's seniors are also voting for these networks with their wallets," Fein stated in late January with the release of the institute's report on the pharmacy industry. "For 2013, 44% of Medicare Part D beneficiaries chose a plan that financially rewards them for using a preferred pharmacy."

In an interview in late February, Fein said preferred networks "are really taking off" in the both the commercial marketplace and in Part D. "Right now, probably a third of all commercial payers have some kind of a narrow network offering," he said. "So you're seeing a lot more of these networks."