Do Preferred Pharmacy Networks Save Money for Part D Beneficiaries?


A new Oliver Wyman study reveals costly findings about Part D beneficiaries enrolled in plans without preferred pharmacy networks.

Preferred pharmacy networks are a contributing factor in keeping premiums stable and affordable for Part D beneficiaries, according to a new study.

The study, from Oliver Wyman, commissioned by the Coalition for Affordable Prescription Drugs (CAPD), found that over the last four years, Part D beneficiaries enrolled in plans without preferred pharmacy networks pay twice as much in premiums (in the individual Prescription Drug Plan [PDP] market).

If Part D plans were unable to establish preferred pharmacy networks, federal spending on Medicare Part D would be $4.5 billion higher per year, according to the report. The report projects that federal spending on Medicare Part D would be roughly $45.8 billion higher between 2018 and 2026, if preferred pharmacy networks were not an option for Part D plans.

Additionally, plans that adopted a preferred pharmacy network in 2018 realized an average premium decrease of $14 per member per month, leading to an annual savings of $168 for those beneficiaries.

In November 2017, CMS published a proposed rule that included changes to the Any Willing Pharmacy provision for Medicare Part D.


“These changes could potentially constrain Part D plan sponsors and their pharmacy benefit manager partners in tailoring preferred pharmacy networks,” says one of the study authors Randall Fitzpatrick, principal actuary at Oliver Wyman.

CAPD commissioned Oliver Wyman to look into the impact preferred pharmacy networks have on member premiums for the more than 21 million beneficiaries and federal spending.

The analysis estimated the impact of the elimination of the use of preferred pharmacy networks by PDPs, according to Fitzpatrick.

“In our work, we relied on publicly available data,” Fitzpatrick says. “Specifically, we used data from CMS that includes formularies for each PDP and enrollment and enrollee premiums by plan made available by CMS. Once we were able to identify the PDPs that employ preferred pharmacy networks, we used enrollment data to calculate the total beneficiaries enrolled in these plans.”

The next step in the researchers’ process was to determine the premium change assuming preferred pharmacy networks are eliminated. To accomplish this, they considered the average two-year premium increase for plans that changed from having a preferred pharmacy network to a standard pharmacy network and those plans that maintained a standard pharmacy network.

Other unique findings include:

  • Ninety-nine percent of beneficiaries in an individual stand-alone Part D plans are enrolled in plans with preferred pharmacy networks.

  • Between 2011 and 2018, the number of individual Part D plans that included a preferred pharmacy networks grew from 7% to 98%.
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