Tuesday, October 14, 2014

EXCLUSIVE: For 2015, almost 9 out of 10 Medicare Part D plans will have a preferred pharmacy network

Tomorrow, Medicare Part D kicks off its open enrollment period. Through December 7, America’s seniors can keep their current plan or switch to a new one.

Who ya gonna call to understand the latest preferred pharmacy network trends? Drug Channels, of course!

For 2015, our analysis reveals that an astonishing 87% of Medicare Part D regional prescription drug plans (PDP) will have a preferred cost sharing network. That’s a big Twinkie!

Read on for our exclusive look at the 2015 Part D landscape, which includes insights on the major health plans—UnitedHealthcare, Humana, Express Scripts, et al—behind the PDPs.

Are pharmacies headed for a disaster of biblical proportions? In an upcoming article, I’ll look at pharmacy participation in the biggest plans’ networks.


Perhaps you’re thinking: “Adam, pretend for a moment that I don’t know anything about metallurgy, economics, or Medicare—and just tell me what the hell is going on.”

Well, in a PDP with a preferred cost sharing pharmacy network, a Medicare Part D beneficiary has the option of using any network pharmacy. However, any copayment or coinsurance will be lower at a preferred pharmacy. Thus, the preferred network model gives beneficiaries a choice of pharmacy, but also provides financial incentives to use the pharmacies that offer lower costs to the government.

The Part D preferred pharmacy network wave began in 2011, when Humana and Walmart launched their first plan. As I wrote at the time, it was An Inevitable Surprise for Pharmacies and PBMs. The Center for Medicare & Medicaid Services (CMS) now refers to the pre-chosen forms as “preferred cost sharing.” See New Part D Final Rule: What CMS Still Doesn’t Get about Pharmacies, PBMs, and Preferred Networks.

For a broader analysis the narrow pharmacy network trend, see chapter 8 of the 2013–14 Economic Report on Retail, Mail, and Specialty Pharmacies.


I identified the Medicare Part D prescription drug plans (PDP) with preferred cost-sharing pharmacy networks using the 2015 Drug and Health Plan Data and the 2015 PDP Landscape Source Files (v 09 16 14).

My proton pack includes only stand-alone PDPs. I eliminated these plans from the sample:
  • Employer-sponsored plans
  • Medicare Advantage PDPs (MA-PDP)
  • Plans from U.S. territories and possessions (American Samoa; Guam; Northern Mariana Islands; Puerto Rico; Virgin Islands)
  • Employer/union-only group plans (contracts with "800 series" plan IDs)
I included 56 plans that had been slimed (placed under sanction) as of September 2, 2014. CMS provides information for these plans, but they can’t accept new enrollees. All of these plans are either the SecureRx Option PDPs, offered by Avalon insurance Company, or the SmartD Rx PDPs, which Express Scripts acquired in 2013.

My final sample included 91 plans, operating 1,001 regional PDPs. Sixteen plans are being offered in all 34 regions, for a total of 544 PDPs (=16*34). The other 75 plans are operating in anywhere from 1 to 33 regions and account for 457 regional PDPs.


Preferred cost-sharing pharmacy networks have now overrun the 2015 PDP landscape.

There are 66 plans with preferred networks, up from 56 plans in 2014 and only 16 plans in 2013. These plans operate 870 regional PDPs, which account for 87% of the total regional PDPs for 2015. (Note that a few plans don’t have preferred cost sharing in every region.) In 2014, 72% of the nearly 1,200 regional PDPs had a preferred network.

Here is a summary of the major companies offering PDPs, along with the split of preferred cost sharing vs. open pharmacy networks.

[Click to Enlarge]

2015 highlights:
  • The total number of PDPs declined by 14%, from 1,169 in 2014 to 1,001 in 2015. PDPs with preferred networks increased by 3%, from 841 in 2014 to 870 in 2015.
  • Humana is offering the same three plans as last year: Humana Enhanced, Humana Preferred Rx Plan (its original plan with Walmart), and the co-branded Humana Walmart Rx Plan. All three plans have a preferred network and are being offered in all 34 regions.
  • UnitedHealthcare reduced its AARP plans from three to two, both of which have preferred cost sharing pharmacy networks.
  • Consistent with last year, only one of CVS Caremark’s two SilverScript plans have preferred cost sharing networks. These plans are no longer under CMS sanction, and can enroll new members for 2015.
  • Both Express Scripts plans now use preferred cost sharing. Walgreens is the major drugstore chain in both plans.
  • All three Cigna-HealthSpring plans now have preferred cost sharing networks. In 2013, no Cigna plan had a preferred pharmacy network.
  • Aetna’s two plans have preferred cost sharing. However, the Aetna Medicare Rx Saver PDP has preferred cost-sharing in only 29 regions, and no preferred cost sharing in 5 regions. The Aetna Medicare Rx Premier PDP has preferred cost sharing in all 34 regions. Aetna replaced the co-branded Aetna CVS/pharmacy PDP with the Aetna Medicare Rx Saver plan.
  • Symphonix has two co-branded preferred cost sharing plans—Symphonix Rite Aid Premier Rx and Symphonix Rite Aid Value Rx. Both plans are offered in 18 regions. In 12 other regions without a Rite Aid pharmacy, two plans—Symphonix Premier Rx and Symphonix Value Rx—have preferred cost-sharing.
The initial 2015 enrollment data will be released in January. On Thursday, we’ll ponder whether pharmacies will know what it’s like to be roasted in the depths of the Slor.

P.S. This year, Ghostbusters celebrated its 30th anniversary. If that doesn’t make you feel old, then consider that a “female-centric” remake is now in the works. I ain’t afraid of no reboot?


  1. I quietly hope all my Part D people migrate away from me to some preferred chain.. Part D reimbursement sucks. This would free my
    staff up to work our more profitable and rapidly growing cash side of the

  2. Adam,

    How much does Wal-Mart pay to Humana annually in the form of rebates or other paymentsto be the exclusive pharmacy provider and be co-branded on the cards?

  3. Preferred networks are less common in commercial plans, so this particular trend will have less influence.

  4. There are no public data on this question. I highlight the pharmacy-plan arrangements in my upcoming article on preferred network participation.

  5. Adam,
    Are any of the independent PSAO's in a better position than the others in terms of preferred part D networks?

  6. No idea. It's very difficult to figure out network participation, although independents feature prominently as preferred pharmacies in many plans. I'll have more details next Tuesday.

  7. I wonder why there is no public data?? Do you believe there is no money changing hands between Wal-Mart and Humana for these arrangements and co-branding?