“Preferred Pharmacy” Drug Plans More Expensive for Medicare and Taxpayers, Comparison Finds

Published Online: Friday, March 7, 2014
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ALEXANDRA, Va. (March 7, 2014) – As the public comment period for Medicare’s proposed rule for Medicare Part D drug plans draws to a close, cost comparisons using the program’s Plan Finder website suggest that “preferred pharmacy” drug plans often are more expensive than “open” networks, in potential violation of the Social Security Act, the National Community Pharmacists Association (NCPA) said today.

“Anyone who is concerned about Medicare beneficiaries, protecting taxpayer dollars, or the long-term solvency of Medicare should be troubled by the impact of ‘preferred pharmacy’ drug plans,” said NCPA CEO B. Douglas Hoey, RPh, MBA. “The plans have been aggressively, and, in some cases, deceptively marketed to seniors, forcing some to travel 20 miles or more to reach a ‘preferred’ pharmacy. In many instances they appear to be increasing Medicare costs as well.”

Using the Medicare Plan Finder website that was established to help seniors evaluate and choose a drug plan, NCPA staff compared “preferred pharmacy” plans to open network plans that do not financially penalize patients for using the pharmacy of their choice. The analysis compared six plans with both preferred and open network options, using a “market basket” of the same six drugs: alendronate sodium 70 mg; hydrochlorothiazide 25 mg; lisinopril 20 mg; metformin hcl 500 mg; metoprolol tartrate 50 mg; and simvastatin 40 mg. (Previous NCPA Plan Finder comparisons focused just on preferred pharmacy plans and contrasted the costs at the preferred pharmacy vs. the costs of choosing a non-preferred pharmacy.)

According to the analysis (factoring in deductibles and premiums):
  • In 9 out of 13 instances, Medicare paid more for preferred network insurance plans than for open network insurance plans.
  • In 11 out of 13 cases, the consumer paid more for open network insurance plans than for preferred network insurance plans.
  • In 6 out of 13 instances, the preferred network insurance plan has a higher total cost.
In sum, lower copays to attract beneficiaries to preferred network plans are paid for by shifting costs to Medicare and taxpayers. By law, Medicare costs associated with a preferred network plan must not exceed cost associated with a comparable open network plan.

To address this situation, Medicare has proposed two common sense solutions. First, prohibit “preferred” arrangements between drug plans and pharmacies from increasing costs to Medicare by requiring greater transparency. Second, allow “any willing pharmacy” to participate in a preferred network if it accepts the requisite terms.

“Community pharmacists support these aspects of Medicare’s proposed rule and encourage the agency to implement them as soon as possible,” Hoey added.

Dozens of Members of Congress have spoken out in favor of this policy. In addition, Medicare beneficiary advocates such as the Alliance for Retired Americans; American Federation of State, County and Municipal Employees (AFSCME) California Health Advocates; Center for Medicare Advocacy, Inc.; Families USA; Medicare Rights Center; National Committee to Preserve Social Security and Medicare; National Council on Aging; and National Senior Citizens Law Center have expressed support for this particular provision of the Medicare proposed rule.

To learn more, go to www.ncpanet.org/medicare.
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