New Study: Medicare Preferred Pharmacy Networks Will Save the Government Up to $9.3 Billion Over 10 Years

First Actuarial Study to Examine Impact of Preferred Pharmacy Networks on Federal Government's Part D Costs

WASHINGTON, Oct. 28, 2013 /PRNewswire-USNewswire/ -- A new actuarial study released today by the Pharmaceutical Care Management Association (PCMA) finds that preferred pharmacy networks will reduce federal Medicare Part D costs up to $9.3 billion during the next 10 years. The study—conducted by the actuarial firm Milliman— is the first to examine the impact of preferred pharmacy networks on the full range of federal government costs in Part D.

"It was never in question that seniors love low-premium, low-copay Part D plans with preferred pharmacy networks," said PCMA President and CEO Mark Merritt. "Now this 'game-changing' study shows that preferred pharmacy networks save the federal government billions as well."

This study expands on a recent analysis of preferred networks by the Centers for Medicare and Medicaid Services (CMS) to model the full range of government payments to Part D drug plans and take into account post point-of-sale price concessions, a key savings driver for many preferred pharmacy network plans.

Milliman's detailed actuarial analysis shows that preferred pharmacy networks generate significant savings for the federal government.  Major findings include:

  • Preferred pharmacy network plans are estimated to reduce federal Medicare spending by approximately $870 million in 2014.
  • Over the next 10 years, preferred pharmacy network plans are estimated to reduce federal Medicare spending by $7.9 to $9.3 billion.
  • The largest two-year decrease in federal direct subsidies in the history of the Part D program has coincided with the rapid adoption of preferred pharmacy network plans and the increased use of generic drugs.
  • Post point-of-sale price concessions cause a greater reduction in federal Part D costs than equivalent drug discounts reflected at the point-of-sale.

Separately, Part D seniors in plans with preferred pharmacy networks are overwhelmingly satisfied, citing lower costs, convenient access to pharmacies and other benefits, according to a survey from Hart Research Associates. The survey found that 85 percent of seniors surveyed are satisfied with their preferred network plan. In addition, the survey found that four in five seniors would be disappointed if their preferred network plan is eliminated.  

According to a recent analysis of Part D data, more than 70% of Medicare Part D plans will feature a preferred pharmacy network in 2014. 

Currently there are more drugstores in the U.S. than McDonald's, Burger Kings, Pizza Huts, Wendy's, Taco Bells, Kentucky Fried Chickens, Domino's Pizzas, and Dunkin' Donuts combined, creating a highly competitive environment.

PCMA represents the nation's pharmacy benefit managers (PBMs), which improve affordability and quality of care through the use of electronic prescribing (e-prescribing), generic alternatives, mail-service pharmacies, and other innovative tools for 216 million Americans.

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SOURCE Pharmaceutical Care Management Association