A Centers for Medicare & Medicaid Services (CMS) analysis of preferred pharmacy pricing in Medicare Part D drug benefit plans drew conflicting responses this week.


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Views differ on CMS study of preferred pharmacy pricing

July 3rd, 2013

WASHINGTON – A Centers for Medicare & Medicaid Services (CMS) analysis of preferred pharmacy pricing in Medicare Part D drug benefit plans drew conflicting responses this week.

The National Community Pharmacists Association said Friday that the Part D claims analysis by CMS, which compared negotiated prices of preferred and non-preferred retail pharmacy networks in Part D plans, finds that "prices are sometimes higher in certain preferred networks" versus traditional plans offering patients greater choice and that, because enrollment in such plans has increased, "the impact of higher preferred network prices on the program as a whole is likely to become increasingly significant."

On Thursday, however, the Pharmaceutical Care Management Association (PCMA), which represents pharmacy benefit managers (PBMs), said the CMS study validates that negotiated prices at preferred pharmacies typically are lower.

"The CMS analysis confirms that negotiated prices at preferred pharmacies are lower on average than at non-preferred pharmacies," PCMA president and chief executive officer Mark Merritt said in a statement. "Indeed, government and beneficiary savings from preferred pharmacy network plans are likely even greater, as the government's analysis takes into account only part of the savings from these plans. Unfortunately, the CMS methodology does not include the increased savings from other factors including premiums, reinsurance and post point-of-sale price concessions that ultimately determine CMS payments to preferred network plans."

In the conclusion of its report, CMS said that based on a one-month sample, negotiated pricing for the top 25 branded medications and the top 25 generic drugs in the Part D program at preferred pharmacies was lower than at non-preferred pharmacies.

"However, there are different results between sponsors once we include mail-order pharmacy costs," CMS noted. "When both mail and retail pharmacy costs are included, some sponsors' preferred network pharmacies are offering somewhat higher negotiated prices than are offered by their non-preferred network pharmacies. Thus, our hypothesis that preferred network pharmacy negotiated prices are lower than non-preferred network pharmacy negotiated prices was not confirmed."

CMS said in the report that drug plan sponsors, under 423.120(a)(9), are required to ensure that the offering of lower cost sharing at preferred pharmacies doesn't lead to higher payments to plans, which the agency takes to mean that preferred pharmacies should be offering lower negotiated prices than those of non-preferred network pharmacies.

"Since we were aware of individual complaints about some drug costs being higher in preferred pharmacies," CMS stated in the study, "we set out to test our hypothesis that preferred network pharmacy negotiated prices are lower than prices in non-preferred network pharmacies."

According to the report, in March 2012, only about 11% of beneficiaries in stand-alone Part D plans were enrolled in contracts deemed as having higher preferred pharmacy than non-preferred pharmacy prices. But CMS found that between 2012 and 2013, the enrolled population in drug plans with a preferred network has doubled.

"We have determined that negotiated prices are sometimes higher in certain preferred networks — contrary to our expectations," CMS stated. "Thus, we believe the impact of higher preferred network prices on the program as a whole is likely to become increasingly significant. Since we believe higher negotiated prices in network pharmacies violate the intent of 1860D-4 (b)(1)(B), we are considering options for clarifying our requirements in future rulemaking."

NCPA said the CMS analysis builds on an NCPA study of 2013 data on the Medicare Plan Finder website that compared the full costs of four commonly used medications between preferred and non-preferred pharmacies. That analysis found that most of the time the full cost was more expensive at preferred pharmacies than at non-preferred pharmacies. What's more, NCPA said, the CMS study findings reflect concerns about preferred pharmacy drug plans that have been raised by Medicare officials, 19 U.S. senators and 31 U.S. representatives, among others.

"NCPA has opposed these preferred pharmacy plans because they are not in the best interest of many patients, they have been deceptively marketed and they amount to government-sanctioned bias against small-business, community pharmacies since they do not require plans to offer participation to all pharmacies," NCPA CEO B. Douglas Hoey said in a statement.

"There is a simple solution to this problem, which Medicare itself has endorsed as 'the best way to encourage price competition and lower costs.' Allow any legitimate pharmacy provider that is willing to accept a health plan's terms and conditions, including reimbursement, to participate in that plan's network, whether it is a preferred network or a traditional one," Hoey added. "That gives patients greater freedom to choose a pharmacy that best meets their personal health and medication adherence needs without increasing costs to the health plan or its sponsor, in this case Medicare."

PCMA noted that 49 of 50 of the drugs examined by CMS had lower average negotiated prices at preferred pharmacies, with Lipitor being the one exception. Also, CMS found that on average, negotiated prices at preferred pharmacies, including mail-service pharmacies, were 3% lower for brands and 11% lower for generics, according to PCMA.

"A recent report conducted by Avalere Health found that the top five Medicare Part D plans with the lowest average premiums all include preferred pharmacy networks," Merritt stated. "The report also found that of all Part D plans with national or near-national status, seven of the top 10 with the lowest average premiums have preferred pharmacy networks."

He added that seniors are satisfied with their Part D coverage. "A national poll conducted by Hart Research Associates shows that seniors in plans with preferred pharmacy networks are overwhelmingly satisfied, citing lower costs and convenient access to pharmacies, among other benefits," he explained. "The survey revealed that 80% of those in preferred pharmacy plans — which translates to over 7 million seniors — would be very upset if their plan was no longer available in the future."

Still, Hoey noted that preferred pharmacy plans aren't for everyone enrolled in a Part D plan. "Seniors in rural areas in particular may have to travel 20 miles or more to obtain their prescription drugs from a preferred pharmacy," he stated.

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