Tuesday, January 23, 2018

New Part D Data: CVS Wins Big in 2018's Preferred Pharmacy Networks

Just-released data from the Centers for Medicare & Medicaid Services (CMS) confirms that preferred cost sharing networks will continue to dominate Medicare Part D. Our exclusive analysis finds that for 2018, 99.9% of seniors are enrolled in Prescription Drug Plans (PDPs) with preferred pharmacy networks.

Below, we use the new enrollment data to analyze the major pharmacy chains’ position within the 22 major Part D plans that have preferred networks. As you will see, CVS looks poised in 2018 to recapture major market share from Walgreens and Walmart. Poor ol’ Rite Aid will once again lag far behind.

As long as pharmacies accept lower reimbursements in exchange for increasing or maintaining store traffic, preferred networks will continue to dominate the marketplace. For 2018, CVS will gain significant prescription market share—but at the cost of lower prescription profit margins. Unlike poker, the Part D preferred network winners play the lowest card.

DEAL ‘EM

You can find data on Prescription Drug Plan (PDP) enrollment here: Medicare Advantage/Part D Contract and Enrollment Data. These data reflect enrollments accepted through December 8, 2017. The open enrollment period ended on December 7, 2017, so the numbers appropriately reflect 2018 trends.

Last October, we documented that 99% of 2018 Medicare Part D prescription drug plans (PDP) would have preferred network structures. See Preferred Pharmacy Networks Will Dominate 2018 Medicare Part D Plans. Our evaluation included only stand-alone PDPs and excluded certain other plans. See my original article for further details on the methodology.

Our final sample included 74 Part D plans, operating 782 regional PDPs. For 2018, 99% of PDPs have a preferred network. It’s therefore no surprise that 99.9% of PDP beneficiaries are in a preferred plan for 2018.

AT THE FINAL TABLE

In CVS Bets Big: Our Exclusive Analysis of Pharmacy Chain Participation in 2018's Part D Preferred Pharmacy Networks , we examined pharmacy participation in the 22 major multi-regional Part D plans with preferred networks. Based on the new enrollment figures, these plans enrolled 19.4 million people, or 93% of the total beneficiaries enrolled in a stand-alone Part D plan.

We can use these data to measure the major retail chains' positions in the 2018 preferred networks. The chart below shows the total enrollment in the plans for which each chain is a preferred pharmacy. For comparison, we include data from our January 2017 analysis of enrollment.

[Click to Enlarge]

The data quantify the relative position of the major retail chains:
  • For 2018, CVS reversed course from its 2017 strategy and went all in as a preferred pharmacy in 11 major Part D plans. What’s more, CVS displaced Walgreens in the five plans from Aetna/First Health and EnvisionRx. (Perhaps anticipation of the CVS-Aetna deal was a factor?) CVS is the primary drugstore chain in the new Express Scripts Medicare Saver plan. It is also the only preferred pharmacy chain in the plans that switched from an open to a preferred network: CVS Health’s SilverScript Choice and the Wellcare plans.

    CVS Health’s retail pharmacies are preferred in plans that enrolled 8.5 million people, compared with being preferred in plans enrolling fewer than 300,000 people for 2017. CVS’s prescription growth lagged that of the market in 2017. But for 2018, CVS is already projecting same store script growth of 6% to 7%.
  • For 2018, Walgreens was displaced by CVS in the plans highlighted above. Based on the initial enrollment data, 8.7 million people signed up for the 11 plans in which Walgreens is a preferred pharmacy. As you can see from the chart above, these bad beats translated into a weaker position compared with 2017. On the bright side, Walgreens is the only national chain in the AARP MedicareRx Walgreens plan. That plan grew its enrollment by 85%, to 580,504 people.
  • Walmart was dealt in as a preferred pharmacy for only 11 of the 22 major preferred cost sharing networks. Consequently, 11.5 million people are enrolled in plans with Walmart as a preferred pharmacy. That’s down slightly from its position in 2017 preferred plans.

    Walmart benefits from being the only national chain in the Humana Walmart Rx Plan. That plan enrolled 2.4 million people, which accounts for 11.5% of total Part D plan enrollment and is 8% higher than the 2017 figure.
  • Poor Rite Aid played a losing hand. It is not participating as a preferred pharmacy with any of the major multi-regional plans. For 2018, it is preferred only in the plan sponsored by EnvisionRx, the PBM that it acquired in 2015. That plan enrolled fewer than 500,000 seniors, though enrollment grew by 65% compared with the 2017 figure.
The January enrollment data suggest that CVS will gain significant Part D prescription market share this year. Will its dominance of preferred networks be the wild card for its 2018 retail pharmacy profits?

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