Thursday, October 17, 2013

Walmart Plays to Win in 2014 Part D Preferred Networks, while CVS and Rite Aid Lag

In my previous post (For 2014, more than 70% of Medicare Part D plans have a preferred pharmacy network), I highlighted the plans that will dominate Medicare Part D with preferred pharmacy networks.

Below, I examine the pharmacies in the biggest plans’ networks. Key conclusions:
  • Walmart participates in more Part D preferred networks than does any other chain.
  • Supermarket and other mass merchants—such as Kroger, Safeway, and Target—also now big players in preferred networks.
  • Among major chains, CVS and Rite Aid are the laggards.
  • Once again, independent pharmacies seem to have missed an opportunity.
Read on for what's happening in your world today.

I examined the 24 major multi-regional plans with a preferred pharmacy network. These plans operate 769 regional PDPs, which account for 66% of the total regional PDPs for 2014 (and 90% of regional PDPs with a preferred network). See Tuesday’s post for more details on the 2014 plans.

The table below summarizes pharmacy chain participation in these plans’ preferred networks. Click to enlarge the image. Or, click here to download the list as a PDF.

A chain’s participation usually means that all of its brands also participate. Thus, Walmart includes Walmart, Sam's Club, Neighborhood Market pharmacies, and Walmart Express.

  • Walmart wins big. Walmart is in 21 of the 24 major preferred networks. It is excluded from only: (1) the Rite Aid co-branded plan, and (2) the Smart D Rx plan, which is under CMS sanction and can’t accept new enrollees. Walmart estimates that nearly 25% of its 2012 prescription volume came from its participation in narrow networks, compared to less than 1% in 2009. Looks like its share will grow even more. (NOTE: Updated on 10/18/13, per comment from Tom Hill of Walmart below.)
  • Walgreens stays in the game. In 2013, Walgreens jumped on the preferred network bandwagon. In 2014, it kept pursuing these deals, by becoming preferred in 10 major Part D plans. Perhaps the company learned something from its imbroglio with Express Scripts
  • CVS and Rite Aid are also-rans. Except for its participation in the co-branded Aetna plan, CVS is not well-positioned in 2014’s Part D preferred networks. The pharmacy is preferred only with second-tier players (Cigna, United American) and the sanctioned SilverScript plans. Rite Aid is in a similar position.
  • Other chains get busy. For 2014, Kroger, Safeway, and Target became much more active participants. Smaller chains—including Kmart, Costco, Publix, H-E-B, and Costco—are also preferred pharmacies in multiple networks.
  • Whither independents? Public data do not identify many independents in Part D preferred networks. As far as I can tell, independent pharmacies are publicly identified as participating only in the sanctioned SilverScript and Smart D plans. Medicine Shoppe and Health Mart are part of some smaller plans, such as the Anthem Blue Cross and Blue Shield plans (not shown above). Seems like a failure by the Pharmacy Services Administration Organizations (PSAOs), which negotiate and administer contracts between Pharmacy Benefit Managers (PBMs) and independent pharmacies. (For more on PSAOs, see pages 26-29 of the 2013–14 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors. )
As the Walmart execs said: Sweet Lincoln's mullet!

UPDATE: The article was updated to reflect Walmart's preferred pharmacy status in the SilverScript and Aetna/CVS networks. 


  1. Adam,
    How can independents Fail if they are not allowed to participate in these networks. I know i would join every single one,but when i try i am told by the PBM that the plan is full or is not being offered to independants!!!

  2. Adam - I believe "Seems like a failure by current healthcare law" would be a more appropriate statement in your last paragraph. Current law allows the PBMs and plan sponsors to pick and choose who they want in their preferred network. They don't even invite the independents and PSAO's to the table. What an outrage!! Look at Florida... BCBS of FL excluded ALL independents from their preferred network.

  3. " Independent pharmacies seem to have missed an opportunity ", obviously Adam is greatly misinformed. A "missed opportunity" implies that independents were given an opportunity and chose not to accept. My PSAO made many attempts to join a preferred network but was not even allowed to look at a contract, much less negotiate terms.

  4. Its going to boil down to a change in medicare part d once the complaints start rolling in once 2014 starts. There are alot of medications on plan finder that i am as an independent selling cheaper and the preferred pharmacy. Go figure, no one gets anything for free. And thats a fact, Jack!!!

  5. Both the SilverScript and SmartD plans can't accept new applicants due to CMS sanctions. No coincidence that these are the only PBMs with Independents in their preferred networks.

  6. Oh Indy's...don't forget the failed attempt with Smart D. Wally is in all of the plans because it is by far the cheapest pharmacy for any of the payers, and by not including they risk moving business away from the cheapest pharmacy, thus ruining the preferred network strategy (thus why UNH included Wally in their preferred network this year).

  7. Dr Fein, regarding your article on Walmart leading in Part D preferred plans, you stated that "once again independents seemed to have missed an opportunity". Well, the truth of the matter is that independents are not being allowed, so please check out your story.

    Davie Waggett
    Seashore Drug
    Wilmington, N.C.

  8. Adam:

    I wanted to update your posting regarding the preferred pharmacy network participants for the 2014 Medicare Part D Plans. WMT has preferred status for the Aetna/CVS plan.


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