Design an access-based network to reduce costs

August 1, 2010

Innovative payers are starting to look differently at how they build their pharmacy network, using a bottom-up approach to network design.

Access-based network design is an approach that can result in a significant reduction in prescription drug costs while ensuring that members maintain access to a network pharmacy. While the exact process for building an access-based network can vary based on a state's any-willing-provider laws and whether or not the plan is subject to such laws under ERISA, the basic approach follows a few principles:

Set an access standard. Quantify what access standard you want to provide for your members. For example, you may decide that you want to set a standard of 90% of your members living within six miles of a network pharmacy. Once you have quantified this access standard, your objective is to minimize costs while ensuring that the standard is achieved.

Define the prize. Let pharmacies know the number of pharmacies expected in the network. Ensure that pharmacies know their downside risk by basing reimbursement on effective rate guarantees or a cost-plus pricing methodology. By understanding downside risk, pharmacies can be more aggressive in their pricing.

Compete. Have pharmacies compete against each other to get into the network. Allow pharmacies to submit a second, more aggressive bid in order to be a preferred pharmacy that is granted a small copay advantage versus other pharmacies in the network.

Communicate. Announce the network and let members know that they have the option of lower copays at the preferred pharmacies in the network.