Increased use of preferred pharmacy and limited pharmacy networks could save employers, Medicare and Medicaid $115 billion over the next decade, according to a study commissioned by the Pharmaceutical Care Management Association (PCMA).


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PCMA study: Drug store networks could save billions

January 28th, 2013

WASHINGTON – Increased use of preferred pharmacy and limited pharmacy networks could save employers, Medicare and Medicaid $115 billion over the next decade, according to a study commissioned by the Pharmaceutical Care Management Association (PCMA).

PCMA, which represents pharmacy benefit managers (PBMs), said Monday the study indicates that the nation's "extraordinary" number of pharmacy locations means that even in a preferred or restricted pharmacy network, patient access to a brick-and-mortar pharmacy wouldn't be compromised.

"Since the U.S. now has more pharmacies than McDonald's, Burger Kings, Pizza Huts, Wendy's, Taco Bells, Kentucky Fried Chickens, Domino's Pizzas and Dunkin' Donuts combined, greater use of drug store networks can save billions without undermining patient access," Mark Merritt, president and chief executive officer of PCMA, said in a statement. "For public programs, it's far better to reduce health costs by encouraging drug stores to compete than to randomly slash enrollee benefits or provider payments."

Conducted by health care consultancy Visante, the study found that today most plans use "open networks," in which participating drug stores offer basic discounts and consumers pay co-payments instead of the cash price. Far fewer plans use preferred networks — in which drug stores that offer the best discounts are "preferred" over other pharmacies in the broader network — and even fewer plans use "limited networks," which include only the drug stores offering the deepest discounts, according to PCMA.

The study reckons that over the next 10 years, more use of preferred and limited pharmacy networks would save the commercial sector $54 billion, Medicare $35 billion and Medicaid $26 billion, while maintaining Medicare's standards for pharmacy access.

PCMA noted that use of preferred pharmacy networks is growing and can pare prescription costs by an estimated 5%, compared with open networks, according to the study. Limited pharmacy networks can reduce costs by up to 10% or more, the study estimated.

Pharmacy industry observers and executives have said a key reason many businesses thus far haven't gone for preferred network arrangements is that the potential savings hasn't been enough to overcome the pharmacy choice restrictions for employees.

Small pharmacy operators, especially independents, have criticized preferred and limited network arrangements as anticompetitive and not in patients' best interest because they limit pharmacy choice.

"Independent community pharmacies may be unfairly denied access to 'preferred pharmacy' networks. In some instances, they are not offered the opportunity to join such a network," the National Community Pharmacists Association said in a statement late Monday. "Moreover, some pharmacists report being denied the ability to join a preferred network when the pharmacist affirmatively asks."

In many communities, there simply isn't a choice of drug stores, NCPA pointed out. "The exclusion of independent community pharmacies from preferred pharmacy networks may create access issues for some patients. Independent pharmacies are predominately located in underserved rural and inner-city locations. Over 1,800 independent community pharmacies operate as the only retail pharmacy within their rural community," the association stated. "It's not uncommon in some rural communities for the next closest pharmacy to be many miles away."

NCPA added, "It’s disappointing to see PBMs associate pharmacy care with fast food outlets. After all, caring for patients and ensuring the proper dispensing and use of prescription medications are hardly as simple as burgers and fries."

Editor's Note: Article updated with comment from NCPA.

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