Tuesday, October 16, 2018

EXCLUSIVE: Humana Triggers a Small Pullback for Preferred Pharmacy Networks in 2019 Medicare Part D (Plus: Top Sponsors and CVS Health’s POS Plan)

The Centers for Medicare & Medicaid Services (CMS) has recently released the initial raw data on the 2019 Medicare Part D plans.

Our exclusive analysis of these data reveals that preferred cost sharing pharmacy networks will be slightly less popular next year. For 2019, 92% of Medicare Part D regional prescription drug plans (PDP) will have a preferred network. This figure compares with 99% of plans in 2018. The decline will occur primarily because two Humana plans will switch from preferred to open networks for 2019.

Below, I provide historical context on preferred networks’ growth and then discuss the top nine companies behind the 2019 plans. As you will see, narrow pharmacy networks are now an essential and established component of Part D benefit design.

Especially notable will be CVS Health’s SilverScript Allure, the first Part D plan with point-of-sale (POS) rebates for brand drugs. Is Allure the next generation of Part D plan design, or an unattractive offer that helps CVS stop a mandated policy shift that it opposes?

LOOKING FOR CLUES

A preferred network gives consumers a choice of pharmacy while providing them with financial incentives to use the pharmacies that offer lower costs or greater control to the payer. A consumer with a preferred network benefit design retains the option of using any pharmacy in the network. However, the consumer’s out-of-pocket expenses will be higher at a non-preferred pharmacy.

Preferred network models have grown rapidly within the Medicare Part D program, where CMS calls them preferred cost sharing networks. CMS calls the pharmacies in such a network preferred cost sharing pharmacies.

According to federal regulations, preferred pharmacies in Part D must offer “covered Part D drugs at negotiated prices to Part D enrollees at lower levels of cost sharing than apply at a non-preferred pharmacy under its pharmacy network contract.” (source) Beneficiaries who qualify for the Low-Income Subsidy (LIS) face low out-of-pocket drug costs regardless of a pharmacy’s preferred status.

To identify the 2019 Part D preferred cost sharing pharmacy networks, I used the 2019 Drug and Health Plan Data and the 2019 PDP Landscape Source Files (v 10 01 18). My analysis includes only stand-alone PDPs. I eliminated the following 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)
My final sample included 81 plans, which operate 901 regional PDPs:
  • Twenty plans are being offered in all 34 regions, for a total of 680 PDPs (=20*34).
  • Four plans are operating in 33 regions and account for a further 132 regional PDPs.
  • The remaining 52 plans are operating in 8 or fewer regions and account for 89 PDPs. Many of these plans are state-level Blue Cross Blue Shield plans.

DETECTING A TREND

The chart below shows the growth of preferred networks in stand-alone prescription drug plans. In 2011, only 7% of total regional PDPs had a preferred network. For 2019, 92% of Medicare Part D regional prescription drug plans (PDP) have a preferred network.

[Click to Enlarge]

From 2015 to 2017, the share of plans with a preferred network remained fairly steady. During this period, however, the total number of plans declined significantly, from 1,169 in 2014 to 746 in 2017. From 2017 to 2019, the total number of plans will have increased by 21%, to 901. The number of plans with preferred networks, meanwhile, will have increased by 31%, from 633 in 2017 to 826 in 2019.

THE USUAL SUSPECTS

There are 35 companies that will offer PDPs for 2018.

Here is a look at the 2019 highlights from nine major companies. These companies account for 812 (90%) of the total 901 PDPs.

  • Humana is offering the same three plans that it has for the past four years: Humana Enhanced, Humana Preferred Rx Plan, and the co-branded Humana Walmart Rx Plan. In a major switch, however, only the Walmart Rx Plan will have a preferred network. For 2019, the Enhanced and Preferred Rx plans will have open retail networks. In 2018, Walgreens and Walmart have been the preferred chains in these networks.
  • CVS Health’s SilverScript is offering three plans with preferred networks, including SilverScript Choice and Plus plans. Note that for 2018, the Choice plan switched from an open network to a preferred pharmacy network featuring CVS pharmacies.

    CVS Health is also offering SilverScript Allure, an intriguing new plan that provides beneficiaries with an unspecified portion of manufacturer rebates on certain Tier 3, Tier 4, and Tier 5 brand drugs. The plan has a preferred network, a much higher premium than other plans, and, per CVS, is “designed for people who take brand name medications in higher drug tiers.” I’m quite curious to see how many seniors adopt this point-of-sale (POS) rebate plan, especially without any disclosure about the share of rebates being passed through.

    You may recall that last November, CMS asked for feedback on requiring Part D plans to recognize the value of manufacturer rebates in retail prescription prices. (See Will CMS Pop the Gross-to-Net Bubble in Medicare Part D With Point-of-Sale Rebates?) In a comment letter submitted in January, CVS Health wrote that it “strongly opposes any policy that would mandate the application of any percentage of drug manufacturer rebates or pharmacy price adjustments at POS.” (Read the CVS Health comment letter here.) So, is CVS Health cynically offering SilverScript Allure as an unappealing option that will enroll few seniors and embarrass CMS into rethinking its plans? Hmm…
  • Aetna, CVS Health's new best friend, will again offer its Aetna Medicare Rx Saver and Select plans. Starting in 2019, Aetna will no longer offer plans under the First Health name. Instead, it will add a new Aetna Medicare Rx Value Plus plan, which appears to have been previously known as the First Health Part D Value Plus. All three Aetna plans have preferred networks. Given the pending CVS-Aetna deal, you will not be surprised to learn that CVS retail pharmacies are preferred in all three plans. Walmart is preferred in the Saver and Value Plus plans.

    Note that the U.S. Department of Justice (DOJ) required Aetna to divest these plans in order to proceed with their merger. In late September, Aetna announced the sale of these plans to Wellcare.
  • UnitedHealthcare is offering three of the four plans in 2019 that it offered in 2018: two AARP-branded plans and a co-branded AARP MedicareRx Walgreens plan. It is not offering the Symphonix Value Rx plan.
  • Wellcare will offer for 2019 the same three plans as it offered in 2018: Classic, Extra, and Value Script. All three plans will have preferred networks. Recall that Wellcare had switched its Classic and Extra plans from preferred cost sharing to open networks in 2016, and then switched them back to preferred plans for 2018. The Wellcare Value Script plan, which was introduced for 2018 in only four regions, will be offered in all 34 regions for 2019.
  • Cigna will offer the three HealthSpring Rx plans for 2019: Secure, Secure-Essential, and Secure Extra. The Essential plan is new for 2019. All three plans have preferred cost-sharing networks with Walgreens and Walmart.. CVS pharmacies, however, will not be preferred in the Cigna Medicare plans.
  • Express Scripts is offering the same three Express Scripts Medicare plans for 2019: Choice, Saver, and Value. Recall that the Saver plan was introduced for 2018 with CVS Pharmacy and the Kroger family of pharmacies as the preferred pharmacies. For 2019, the Saver plan will also include Walmart.
  • Mutual of Omaha Rx did not offer plans for 2018. For 2019, however, it will offer two new plans—Mutual of Omaha Rx Plus and Mutual of Omaha Rx Value—in 33 regions. Both plans will have preferred pharmacy networks. They are offered through Omaha Health Insurance Company, a Mutual of Omaha affiliate company.
For more on the economics and strategies of narrow network models, see Chapter 7 of our 2018 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.

Next time, I’ll examine what we can deduce from retail chains’ participation in the major preferred networks.

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