How are ‘narrow networks’ impacting community pharmacy?

The cost of prescription drug non-adherence in the United States is estimated at $290 billion annually1. This unsustainable growth in healthcare costs is placing increasing pressure on healthcare organizations and providers to find new, innovative and more cost-effective ways to deliver high quality care to patients. Community pharmacies are greatly impacted by these trends, especially as payers make changes to improve care quality and contain costs. Nowhere is this impact more evident than with the rise of "narrow networks" - prescription benefit networks in which consumers are given either "limited access" to a finite number of low-cost pharmacies or "preferred access" to specific pharmacies through monetary incentives.

Essential Insights connected with Elie Bahou, who has cultivated more than 28 years of experience in retail pharmacy, managed care and the payer arena, to get his take on what community pharmacists need to understand about payers, narrow networks and what steps they need to take to succeed in this new paradigm.

1.     What does community pharmacy need to understand about current trends in pharmacy networks?

Pharmacies should consider that both patients and payers (also known as plan sponsors) are customers of their pharmacy. Now more than ever, payers hold the key to a pharmacy's access to patients. Payers make decisions about which pharmacies are included in a particular pharmacy network. Payers and plan sponsors are increasingly looking at new types of criteria when determining which pharmacies can participate in their networks.

2.     What are 'networks,' and how do they impact both pharmacies and consumers?

There are two kinds of networks in healthcare: open and narrow. Open networks are defined by their inclusiveness-patients pay the same co-payment and out-of-pocket costs for prescriptions, regardless of where they fill their prescriptions. This is the traditional model that most patients and pharmacies are accustomed to. Approximately 60,000 pharmacies fit into this model - this includes almost every pharmacy in the United States.

On the other hand, narrow networks only allow patients access to a select number of pharmacies. Pharmacies compete for access in these networks and trade off lower reimbursement rates for a potential increase in patients.

Narrow networks have become increasingly more popular in recent years, as payers are placing an even greater emphasis on cost savings and quality. Narrow networks come in two forms: preferred or limited. Preferrednetworks give patients the freedom to choose where they fill their prescriptions, but incentivize patients to utilize a select list of 'preferred pharmacies' by offering discounted co-payments if patients use those pharmacies. Limited networks only provide patients the option to fill prescriptions at a specific group or number of pharmacies.

Compared to the more than 60,000 pharmacies included in open networks, we are seeing approximately 20,000-30,000 pharmacies included in narrow networks2.

3.     Why are narrow networks on the rise and which pharmacies are included in those networks?

Payers increasingly use narrow networks as a way to help control drug spending and consequently achieve drug savings. A pharmacy's participation in a Pharmacy Benefit Manager's (PBMs), individual payer's, or plan sponsor's narrow network has historically been primarily based on the pharmacy's willingness to accept reduced reimbursements coupled with a higher reimbursement rate for dispensing generic medications. However, payers are increasingly looking at specific, measurable criteria, including the geographic area a pharmacy serves, the quality of care it delivers to patients, and other performance measures when determining which pharmacies to include in their preferred networks.

4.     What quality measures are being used to determine which pharmacies can participate in narrow networks?

Payers are increasingly looking to pharmacies' performance on specific quality metrics when making decisions about which pharmacies can participate in their narrow networks.

It's important to understand that the Centers for Medicare & Medicaid Services (CMS) implemented a quality ratings system called "CMS Star Ratings" to provide an objective framework for measuring the care quality that payers provide to patients. Medicare Plans are rated through these measurements just like a five-star restaurant or hotel. Based on their performance they receive bonus payments - a monetary incentive for performing well. Conversely, plans receiving less than a 3-star rating for three consecutive years can be shut down by CMS.

That means that health plans are increasingly focused on how pharmacies perform on the Star Ratings' pharmacy-related metrics. One key area of focus is medication adherence, particularly in the categories of diabetes, statins for cholesterol and anti-hypertensive medications to treat high blood pressure. In addition, plans are looking at the extent to which pharmacies are identifying gaps in care - specific to patients with diabetes being on an ACE/ARB and avoiding high-risk medications in the elderly - which can be improved with proper intervention.

Pharmacies that are not able to demonstrate their performance on these specific pharmacy-related metrics may risk being left behind, and ultimately losing access to patients.

5.     What steps should pharmacies take to increase the likelihood that they'll be included in narrow networks?

It is important for pharmacies to understand that payers are being incented to meet very specific quality metrics. Pharmacies know their patient base and are well positioned to work with their patients to improve medication adherence, particularly in the areas related to Star Ratings. Identifying potential gaps in care and working to close those gaps through patient counseling and Medication Therapy Management (MTM) services also helps pharmacies demonstrate their value on the same metrics used to rate plans.

Historically, one challenge that has prevented pharmacists from delivering MTM services is that there are currently few opportunities for them to be reimbursed for delivering the services to patients. Medicare Part D does currently reimburse pharmacists for delivering MTM services, but only a very small percentage of enrollees are eligible. It can be a challenge to find enough of those eligible patients to make it truly viable to deliver these services. I think you'll see an increase in services that help break down these barriers. For example, Cardinal Health is rolling out new MTM services this month, to help pharmacists ensure their patients are on the right medications, using them the right way and achieving the desired results. More than 180 retail pharmacies that have participated in our pilot MTM program have delivered nearly four times as many comprehensive medication reviews than the industry average.

One thing's for sure. Ongoing focus on adherence and closing gaps in care can help a pharmacy demonstrate their value in delivering quality health care, align with payers and avoid being left behind.


1NEHI Research Brief, "Thinking Outside the Pillbox: A System-wide approach to Improving Patient Medication Adherence for Chronic Disease." NEHI, 2009
Fein, Adam J. "The Big Squeeze". Pharmaceutical Executive. May 2013.


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