Pharmacy Networks Play Musical Chairs

Pharmacy TimesNovember 2022
Volume 88
Issue 11

Every change in participation offers the opportunity to self-channel to community pharmacies or mail order.

More and more, pharmacy providers are turning down pharmacy benefit management (PBM) contracts whose terms are becoming increasingly untenable with every cycle.

Administratively expensive auditing, below-cost reimbursement, differential copayments, mandatory mail order, and other provider-unfriendly conditions are leading to a game of musical chairs among “in-network” pharmacy providers. As each chair is vacated, a new opportunity emerges to transition a household to a preferred pharmacy. Sometimes that pharmacy is in a strategic alliance, and sometimes the network builder owns the pharmacy.

TRICARE Changes About Half Its Participants in 2 Years

Out went Walmart, seemingly not knowing it was out when the announcement was made,1 and then Kroger,2 and most independents3 a year later. In came CVS, but only after it had left its seat during the prior negotiating cycle. Meanwhile, the growth of Express Scripts’ mail-order business places the PBM that runs an insurance company in a very favorable position to make money by servicing the Defense Health Agency (DHA), which is responsible for the health benefits of nearly 10 million armed forces beneficiaries.

In fairness, it appears that Express Scripts tried to make members aware of in-network pharmacies. However, it has always made a mention, strong push, or mandatory provision related to mail-order strategies alongside those efforts. No doubt channeling is only part of the strategy to both make a profit and serve the DHA through its more than $4.3 billion contract with the government. Notably, as of October 19, 2022, Walmart’s TRICARE newsroom directs specialty pharmacy providers to its in-house specialty pharmacy, Accredo, which is now the “primary” specialty pharmacy provider.4

The channeling strategy has also infiltrated Medicare, but the program has more diverse means of being competitive amid more consumer-driven market conditions. The practice is rampant in the Medicare Part D market, with both stand-alone Part D plans and the Advantage Plans they serve using in- and out-of-network strategies to not only negotiate reimbursement rates, but also implement channeling strategies for partners and self-owned pharmacies. Approximately 20% of all Medicare beneficiaries use mail-order services, and most are now subject to smaller networks and differential coinsurance or copayments.5 Nevertheless, Medicare beneficiaries can talk with their feet every fall during the reenrollment period, tempering the network administrator’s ability to force mail order or limit networks in a way that TRICARE beneficiaries won’t like. TRICARE beneficiaries are locked into the program, and the government and its sole contractor, Express Scripts, decide pharmacy matters for beneficiaries. Notably, the process of enrollment with Medicare insurers that own PBMs has become quite creative, with many offering ancillary service support and coverage or prepaid cards that cover OTC medications. These innovations indicate a semblance of competition and marketplace pressures, at least among the PBMs and for some of their clients that don’t have in-house PBMs.

A Fork in the Road

“Just say no” will become an increasingly common response from pharmacy providers. As reimbursement rates fall increasingly below costs, pharmacy networks may become narrower and narrower. Will purchasers demand more favorable contracts to maintain wide pharmacy networks, or will pharmacy provider access start to look more like provider networks for behavioral and mental health care as pharmacies drop even more from third-party coverage participation? Could discount cards be the canary in the coal mine of a broken system that is ready to implode? The number of claims submitted by pharmacies with zero reimbursement has increased dramatically over the past 2 decades. With more than 300 widely used medications that have become “penny” drugs, more of the cost of the community pharmacy benefit is migrating to the cost of dispensing and away from the product itself, considering that community pharmacies are mostly left out of specialty-pharmacy networks. Within 5 years, there may be few to no branded products dispensed by community pharmacies and up to three-quarters of the commercial population may be on high-deductible plans. This trend has led to the proliferation of discount cards, as pharmacy networks, primarily focused on generics, prompted even billionaire sports team owner Mark Cuban to get into the cost plus for generics business, leaving tens of millions of households asking: wait, why do I have drug insurance again?6

About the Author

Troy Trygstad, PharmD, PhD, MBA, is the executive director of Community Pharmacy Enhanced Services Network (CPESN) USA, a clinically integrated network of more than 3500 participating pharmacies.


1. Kime P. Walmart says it was blindsided by its ouster from Tricare Network. October 25, 2021. Accessed November 1, 2022.

2. Seeking more equitable contract, Kroger Health sends notice of intent to terminate to Express Scripts, Inc. News release. The Kroger Co. September 30, 2022. Accessed November 1, 2022.

3. Ruedisueli K. Nearly 14,000 community pharmacies leaving Tricare network next month. MilitaryTimes. September 22, 2022. Accessed November 1, 2022.

4. TRICARE pharmacy network changes many affect independent pharmacy customers. News release. TRICARE. October 13, 2022. Accessed November 1, 2022.

5. Cubanski J, Fuglesten Biniek J, Rae M, Damico A, Frederiksen B, Salganicoff A. Mail delays could affect mail-order prescriptions for millions of Medicare Part D and large employer plan enrollees. Kaiser Family Foundation. August 20, 2020. Accessed November 1, 2022.

6. McMillen J. Should Mark Cuban make CVS, Walgreen and Amazon worry? Forbes. November 2, 2022. Accessed November 8, 2022.

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