Tuesday, November 16, 2021

CVS, Walgreens, Walmart, and Supermarkets Keep Position in 2022 Part D Preferred Networks—With a Little Help from 340B

In Consolidation and Preferred Pharmacy Networks in 2022’s Medicare Part D Plans, I highlighted how those networks have hijacked the world of stand-alone Medicare Part D prescription drug plans (PDP) and become a major presence in Medicare Advantage prescription drug (MA-PD) plans.

Today, I examine the largest retail chains’ participation in the 21 major 2022 Part D preferred networks that the eight largest plan sponsors will offer. Below, we offer you a handy table for scoring not only each chain’s participation, but also all changes from 2021 to 2022.

Narrow networks force pharmacies to trade volume for profits, due primarily to substantial pharmacy direct and indirect remuneration (DIR) payments. One unexpected bright spot has been pharmacies’ participation in the 340B Drug Pricing Program. As you review chains’ eager participation in the 2022 Part D networks, ponder whether a material change in the 340b contract pharmacy market might tarnish the attractiveness of being preferred.

Speaking of next year, please join me for my upcoming live video webinar, Drug Channels Outlook 2022, on December 17, 2021, from 12:00 p.m. to 1:30 p.m. ET. Click here to learn more and sign up.


Preferred network models have grown rapidly within the Medicare Part D program. The Centers for Medicare & Medicaid Services (CMS) calls them preferred cost sharing networks. CMS calls the pharmacies in such networks preferred cost sharing pharmacies.

For 2022, nearly all of the total 766 Medicare Part D regional prescription drug plans (PDP) have a preferred network. Note that due to consolidation among plan sponsors, the number of stand-alone PDPs will drop by -23%, from 966 to 766 plans. See our previous analysis for more details on next year’s market.

We have examined the 21 Part D plans offered by eight major companies. There will be 21 major multi-regional Part D plans with preferred cost sharing pharmacy networks and 1 smaller plan (Elixir RxPlus). These companies will operate 685 regional PDPs, which equates to 89% of total regional PDPs. For each plan, we have identified the preferred status of seven large retail chains.

You can find our analysis of retail chain participation in 2021 plans here: Battle of the Giants: CVS, Kroger, Walgreens, and Walmart Expand in 2021 Part D Preferred Networks.


The major chains will be preferred in fewer networks—but only because the number of PDPs has dropped. Most chains will be in a comparable share of the total available networks.

The table below summarizes retail chain participation as preferred pharmacies. The green shaded boxes indicate a chain’s addition as a preferred pharmacy to a 2022 network (vs. 2021). The red shaded boxes indicate a chain's removal as a preferred pharmacy from a 2022 network (vs. 2021). Click here to download the table as a PDF.

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Here are the highlights of pharmacy participation in 2022 Part D preferred networks:
  • CVS Health. Since the 2018 plan year, CVS Health’s retail pharmacies have actively pursued preferred status in Part D plans. For 2022, CVS pharmacies will be preferred in 12 of the 21 plans tracked in the table above. CVS’s participation is comparable to that of 2021. However, CVS pharmacies will no longer be preferred in the Cigna Secure Rx PDP.
  • Walgreens Boots Alliance. For 2021, Walgreens reversed course and increased its participation in preferred networks. For 2022, it will be preferred in nine plans. It displaced CVS in the Cigna Secure Rx plan, but lost preferred position in the Clear Spring Health plans.
  • Walmart. Beginning in 2020, Walmart reengaged with preferred cost sharing networks. For 2022, it will again have a solid position as a preferred pharmacy in 17 of the 21 major plans. It gained position in the SilverScript SmartRx plan and did not lose preferred status in any plans.

    Medicare history buffs should note that Walmart and Humana launched the first Part D preferred network plan, in 2010. This plan is now known as the Humana Walmart Value Rx Plan. Despite the plan’s name, three other chains—Albertsons, Kroger, and Publix—will also be preferred in it for 2022.
  • Rite Aid. The industry’s smallest large chain will be a reluctant participant in the major networks, due in part to its limited geographic scope. For 2022, Rite Aid will participate as a preferred pharmacy in only two plans that are sponsored by external companies. It will also participate in the two plans sponsored by Elixir, its in-house PBM.
  • Supermarket chains. Kroger and Publix retained their participation in the preferred networks for the fourth consecutive year. For 2022, Kroger— the seventh-largest U.S. pharmacy—will be preferred in 18 of the 21 plans, exceeding all other major chains. Albertsons pharmacies will be preferred in 16 plans, including the three Humana plans and two Health Spring plans. Publix, which was added to our analyses in 2021, will also be preferred in 13 plans.
In an upcoming article, I’ll delve into how smaller pharmacies will participate in the 2022 Part D plans, by examining the pharmacy services administrative organizations (PSAOs).


Over the past few years, pharmacy profits have been significantly reduced by the direct and indirect remuneration (DIR) price concessions paid by pharmacies to the Part D plan sponsors. Pharmacy-related price concessions are referred to as pharmacy DIR fees.

Pharmacy DIR fees are now large enough to have a significant effect on pharmacy economics. We estimate that the net value of pharmacy price concessions reached $11.2 billion in 2020. For more on DIR in Part D, see Section 11.4. of our 2021 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers. Here are our computations of the growth in DIR fees in both absolute dollars and as a percentage of pharmacy revenues. Not the happiest days of a pharmacies’ life.

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Many people don’t appreciate that the 340B Drug Pricing Program helps pharmacies survive in low-margin preferred networks. Today, more than half of all U.S. pharmacies participate as contract pharmacies for 340B covered entities. (See 340B Continues Its Unbridled Takeover of Pharmacies and PBMs.)

The evidence suggests that pharmacies have been using 340B profits to subsidize network rates. This means that these pharmacies are sharing a portion of their 340B profits with health plans by accepting lower reimbursement rates for preferred participation in narrow networks.

A growing number of manufacturers are altering policies regarding 340B discounts at contract pharmacies. (I reviewed this situation in my video webinar Drug Channels Update: 340B Controversies and Outlook.) The legal outcomes have been confusing and contradictory, as this helpful legal analysis reports.

The mixed results appear to be positive for manufacturers’ position on unlimited contract pharmacies. And if challenges to 340B contract pharmacies ultimately succeed, I suspect that preferred networks will make it much less attractive to get back on the train.


Almost 40 years ago, Chrissie Hynde and the Pretenders foresaw these pharmacy industry developments. Click here if you can’t see the video below.

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