Open Enrollment started Saturday, and we got our first look at how our customers’ medications will be priced in 2017 under Medicare Part D. There are several interesting observations to be made.
Preferred, Non-Preferred, and Mail Order
With the release of the 2017 data, we can actually calculate patient-cost and pharmacy reimbursement for one of the more popular plans last year. The object is to recompare the plan while using a preferred pharmacy, a non-preferred pharmacy, and the plan’s mail order pharmacy. For reference, I have also included the 2017 version of another preferred plan popular last year. It also happens to be the only 5-star plan available to my customers in 2017, and one in which I am included as a preferred provider in 2017.
The data below is arranged in columns by plan. This is actually data from a patient I worked up today, and represents their actual drugs. The columns show the Total Adjudicated Amount to the left of the “/” and the patient copay to the right of the “/” mark.
| Drug Name | A Using a Preferred Retail Pharmacy |
B Not Using a Preferred Retail Pharmacy |
C Using The Plan’s Mail Order Pharmacy |
D Preferred Retail 5 Star Plan |
|---|---|---|---|---|
| Amlodipine 10 mg | $1.62 / $1.00 | $7.24 / $7.00 | $2.63 / $2.63 | $1.96 / $1.00 |
| Atorvastatin 40 mg | $1.62 / $1.00 | $7.28 / $7.00 | $10.32 / $3.00 | $7.65 / $1.00 |
| Furosemide 40 mg | $1.60 / $1.00 | $5.05 / $5.05 | $2.54 / $2.54 | $2.20 / $1.00 |
| Gabapentin 300 mg | $4.00 / $2.00 | $43.00 / $15.00 | $26.60 / $6.00 | $22.15 / $6.00 |
| Copay Total | $5.00 | $34.05 | $14.17 | $9.00 |
| Pharmacy Total reimbursement |
$8.84 | $62.57 | $42.09 | $33.96 |
The example above is obviously not representative of all possible drug therapy combinations, but it does demonstrate several tendencies that appear to be reproducible with many different drug combinations I have run so far. For the sake of simplicity, it also is limited to only generic medications that are regularly subject to MAC (Maximum Allowed Cost) pricing. These types of drugs represent a majority of drugs dispensed in most non-specialty pharmacies.
Preferred Retail vs. Non-preferred Retail
Looking at Column A and Column B, we can readily see the difference in both copay and reimbursement based on preferred status. The patient’s copays are significantly lower at the preferred pharmacy for this plan, saving the patient about $30/month or $360/year over a non-preferred pharmacy. The pharmacy, on the other hand, sees only $8.84 per month for these four prescriptions if they are preferred and $61.00 if they are non-preferred. Note that these numbers are not the profit made by the pharmacy, but rather the total reimbursement for these drugs. Given that the published national cost of dispensing, the amount that it costs a pharmacy to dispense a drug on top of the cost of the drug product, is between $9 to $12, the preferred plan does not come close to paying the pharmacy what it costs to dispense the drug. The non-preferred pharmacy, on the other hand shows a profit for its work. This alone explains why there are very few pharmacies in 2017 that accepted the Preferred Status for this plan.
The plan is essentially driving a wedge between the patient and the pharmacy by trying to move a patient to a preferred pharmacy. This access to lives strategy is hard to justify for the pharmacy unless it plans on making up the losses on prescription drug sales by increasing prices elsewhere. This may or may not work for big-box chain pharmacies or grocery stores with pharmacies. It is not even possible for independent pharmacies, and it is therefore no surprise that few independents elected to participate in this plan in 2017. Even a few chain pharmacies declined participation, leaving us with the question: exactly what is the point of this tactic?
Preferred Retail vs. The Plan’s Mail Order
This comparison (Column C vs. Column A) is a real head scratcher. The plan is forcing any preferred pharmacy to accept $30 less in total reimbursement than it pays itself to mail the prescriptions to the patient. Likewise, the plan makes the patient pay more for the same thing. One possible explanation for this is that in some areas, including mine, there are few pharmacies with preferred status. This means that the plan can try to coax these customers to their own mail order pharmacy, arguing that they are “saving” the patient compared to the non-preferred rate, all the while making an excellent profit using the pharmacy they own and operate.
Another Plan’s version of Preferred
While we were preferred in the plan represented in Column A in 2016, our pharmacy dropped the plan for the 2017 plan year. The reasons should be obvious: we cannot survive on such meager reimbursement. On the flip side, our contracting arm did sign a new preferred network, which includes the region’s only 5-star plan. I included this plan as an alternative way preferred networks can work with their pharmacy partners. In this plan, the patient would again pay more for going to a non-preferred pharmacy. I did not include a column for this, but its omission is not the point. The point is that a preferred plan can treat both the pharmacy and the patient fairly. Comparing the patient’s copays for this 5 star plan (Column D vs. Column A), we see that the patient would have lower copays with the 5 star plan. At the same time, the pharmacy is more often paid fairly for its contribution. Yes, reimbursements are lower than those to a non-preferred pharmacy. A more comprehensive analysis will be needed to determine if this contract is more actually more pharmacy-friendly than other preferred networks. Note that some of the reimbursements are still too close to $1, but average reimbursement may be closer to the cost of dispensing and therefore easier for the pharmacy to recoup with other services and methods.
The Bottom Line
Now that we can see the 2017 landscape, my concern over not being preferred with the same plans as last year are somewhat alleviated. If my customers using the 2016 version of the plan in Column B have more loyalty to that plan than to us, their pharmacy, they will either switch pharmacies or start using mail order. But the Access to Lives argument cuts both ways. While plans certainly want to lure patients their way, I have found that patients actually have a lot more loyalty to their pharmacy and pharmacist than their plan. Because my pharmacy is preferred in at least one preferred network (the 5 star plan) which offers basically the same or better value to the patient, the real winner will be the 5 star plan. I have already seen many patients that plan on enrolling in this plan in 2017.
Perhaps, with time, that the whole paradigm could invert. Instead of plans trying to lure patients to them with lower copays, they will instead try to lure patient by enrolling the best pharmacies. That would be a very interesting change. So take time educating your patients during this 2017 Medicare Part D enrollment period. Be sure your patients know which plans you participate in and which ones you dropped in 2017. Let them choose their allegiance: the plan or the pharmacy. Support them, and they will support you. Make every encounter count!