Tuesday, October 22, 2019

Preferred Pharmacy Networks Rebound in 2020 Medicare Part D Plans: Details on WellCare, CVS Health, Humana, Cigna, and More

The Centers for Medicare & Medicaid Services (CMS) has released its data on the 2020 Medicare Part D plans.

Our exclusive analysis of these data reveals that preferred cost sharing pharmacy networks will maintain their dominance as an established component of Part D benefit design. For 2020, 95% of Medicare Part D regional prescription drug plans (PDP) will have a preferred network. In 2019, 92% of plans had such a network.

Below, I provide historical data on preferred networks’ growth and then discuss the top nine companies offering the 2020 plans. Humana is the only major plan sponsor to offer a national plan with an open network for 2020.

The prominence of preferred networks will again pressure pharmacy profits. That’s because pharmacies must pay direct and indirect remuneration (DIR) price concessions, a.k.a., DIR fees. In my next post, I’ll examine chain pharmacies’ participation in these plans and what it means for pharmacy profits.

P.S. Today’s post is brought to you by the letter D.

D IS FOR DATA

A preferred network gives consumers a choice of pharmacy while providing 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 2020 Part D preferred cost sharing pharmacy networks, I used the 2020 Plan Finder Data and the 2020 PDP Landscape Source Files (v 10 15 19). 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 86 plans, which will operate 948 regional PDPs:
  • Twenty plans are being offered in all 34 regions, for a total of 680 PDPs (=20*34).
  • Three plans are operating in 33 regions and 2 plans are operating in 29 regions. These five plans account for a further 157 regional PDPs.
  • The remaining 61 plans are operating in 8 or fewer regions and account for 111 PDPs. Many of these plans are state-level Blue Cross Blue Shield plans.
You can review our 2019 analysis in Humana Triggers a Small Pullback for Preferred Pharmacy Networks in 2019 Medicare Part D.

D IS FOR DOMINANT

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 2020, 95% of Medicare Part D regional prescription drug plans (PDP) will 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 2020, the total number of plans will have increased by 27%, to 948. The number of plans with preferred networks, meanwhile, will have increased by 43%, from 633 in 2017 to 905 in 2020.

D IS FOR PART D

Here is a look at the 2020 highlights from the 9 major companies with national plans. These companies account for 840 (89%) of the total 948 PDPs. Only one of these companies’ plans—the Humana Basic Rx PDP—will have an open retail network.
  • Humana is restructuring its plans for 2020. The three plans that it had offered for the past four years—Humana Enhanced, Humana Preferred Rx Plan, and the co-branded Humana Walmart Rx Plan—have been discontinued. To replace them, Humana will offer two of its own plans—Basic Rx and Premier Rx Plan—and the renamed Humana Walmart Value Rx Plan.

    Only the Humana Basic Rx plan will have an open retail network. Recall that for 2019, Humana had switched two of its plans from preferred to open retail networks.
  • CVS Health’s SilverScript is offering its two SilverScript Choice and Plus plans, both of which have preferred networks. Note that for 2018, the Choice plan switched from an open network to a preferred pharmacy network featuring CVS pharmacies. Both of these plans were offered in 2019.

    CVS Health terminated its ill-fated SilverScript Allure plan, which had been launched for 2019. SilverScript Allure, which was the first Part D plan with point-of-sale (POS) rebates for brand-name drugs, bombed. (See New Part D Enrollment Data: CVS Extends Its Lead in 2019 Preferred Pharmacy Networks.) I still don’t know if Allure was a noble experiment or an unappealing option tailored to enroll few seniors in a plan design that CVS opposed. Now that the rebate rule is dead, I presume that we won’t see much innovation in rebate pass-through unless Congress mandates a change.
  • Four companies are offering the same plans in 2020 that they offered in 2019. All of these plans have preferred cost-sharing networks.

    • Cigna: Three HealthSpring Rx plans (Secure, Secure-Essential, and Secure Extra). The Secure-Essential plan was introduced for 2019.
    • Express Scripts: Choice, Saver, and Value. Note that Express Scripts is offering its own plans separately from Cigna.
    • Mutual of Omaha Rx: Rx Plus and Rx Value. These plans launched for the 2019 plan year and are offered through Omaha Health Insurance Company, a Mutual of Omaha affiliate company.
    • UnitedHealthcare: two AARP-branded plans and a co-branded AARP MedicareRx Walgreens plan.
  • Clear Spring Health is a new plan sponsor for 2020. It will offer two plans with preferred networks: Clear Spring Health Premier Rx and Clear Spring Health Value Rx. Clear Spring Health is part of the Group One Thousand One insurance company.
  • Rite Aid’s EnvisionRx will offer its EnvisionRxPlus plan in all 34 regions. It is also offering a new EnvisionRxSecure PDP in three regions.
For more on the economics and strategies of narrow network models, see Chapter 7 of our 2019 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.

Our next post will examine retail chains’ participation in the major preferred networks. Spoiler alert: The winners may turn out to be losers.

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