CMS Proposed Rules on Medicare Part D

Preferred Networks and Preferred Cost Sharing (p 1974)
CMS has found that in some cases, sponsors actually charge greater negotiated prices in preferred networks which also may lead to increased costs to the government and taxpayers. This situation also makes beneficiaries make choices that are aligned with plan interests and not the best interest of the Medicare program. CMS also proposes that it eliminate the term “preferred networks” and rather use “preferred cost sharing.” CMS believes that this will eliminate the connotation that some network pharmacies are considered “non-preferred pharmacies” without the opportunity to meet the terms and conditions to qualify for preferred cost sharing.

Any Willing Pharmacy Terms and Conditions (p 1978)

CMS proposes that plans offer a single contract with standard terms for any wiling pharmacy that includes all potential preferred cost combinations and negotiated prices possible for retail settings. This would be a new alternative to current market practice where plans offer different contracts for preferred and non-preferred pharmacies. CMS finds that preferred networks do not always result in consistent savings across medication classes and that some non-preferred pharmacies may offer better rates than network pharmacies. CMS believes a change will level the playing field for small independent community pharmacies.

Mail Order Pharmacy (p 1980)

CMS is concerned that beneficiaries who choose mail order pharmacy may experience unnecessary and extended delays in receiving prescriptions because they must wait between 7-10 days for a regular delivery but if problems occur, then this waiting time could be extended. CMS contrasts this to the experience in the community pharmacy setting where a prescription is presented and filled on the same day and any problems with the prescription are resolved in real time also limiting mail order copay incentives.

Prescription Drug Pricing Standards and Maximum Allowable Cost (MAC) (p 2040)

CMS proposes an updated definition of “prescription drug pricing standard” for purposes of reporting Medicare Part D drug prices to CMS to include MAC prices and other formulas that rely on varying prices and not a fixed, published price. CMS supports plan reporting that allows pharmacies to have current data on the amount of reimbursement expected. MACs would need to be updated at least every 7 days.

Proposed Expansion of MTM and Reduction in Plan Variability (p 1947)

Proposed expansion of the MTM program by reducing the number of multiple chronic diseases eligible for coverage from 4 to 2 and reducing the number of medications required to meet “multiple Part D medications” to 2 or more. CMS proposes lowering the cost threshold from the existing $3,144 to $620.

Reference Pricing: Pharmacy Invoice Cost (ACTUAL) for Top Selling Generic and Brand Prescription Drugs

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform. 

The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC.  The bottom line; payers must have access to “reference pricing.” Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.

How to Determine if Your Company [or Client] is Overpaying
Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem.


Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month.

— Tip —

Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving. 

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization.  In this case, the market check language is effectually meaningless.

Reference Pricing: Pharmacy Invoice Cost (ACTUAL) for Top Selling Generic and Brand Prescription Drugs

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform. 

The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC.  The bottom line; payers must have access to “reference pricing.” Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.

How to Determine if Your Company [or Client] is Overpaying
Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem.


Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month.

— Tip —

Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving. 

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization.  In this case, the market check language is effectually meaningless.

Limited Pharmacy Networks are Changing Employer Sponsored Prescription Drug Benefits

Narrow pharmacy networks are growing as payers use these networks as a way to help control drug spending. It is important for payers to understand why narrow networks are increasing.

Creation of Narrow Pharmacy Networks to Control Costs

Increasingly, PBMs are using more tightly controlled pharmacy network models to achieve additional drug spending savings. Narrow networks are not a new concept in healthcare; this is the logic behind preferred provider organizations (PPOs) and health maintenance organizations (HMOs) where preferred or exclusive providers agree to special pricing terms, hoping to realize increased volume. 

Types of Pharmacy Networks

Narrow pharmacy network. With narrow networks, consumers receive financial incentives to use particular pharmacies that offer lower costs and/or give payers greater control. Pharmacies that participate in narrow networks are willing to accept reduced reimbursement rates in order to boost store traffic. There are different types of narrow networks. Two of the most common terms you hear are:

  • Preferred pharmacy network. Consumers can choose any pharmacy in their plan’s network, but pay a lower out-of-pocket cost when they choose to get their prescription filled from preferred pharmacies — which usually represent 20% to 50% of all retail pharmacies — and pay more out of pocket if they buy from a non-preferred pharmacy. For example, a consumer may have no co-payment on certain drugs if a prescription is filled at a preferred pharmacy and a $5 copay if filled at a non-preferred pharmacy in the network.
  • Limited pharmacy network. In this more restrictive model, consumers can only use the specific pharmacies or dispensing formats designated as part of the payer’s limited network. The model gives payers the greatest degree of economic control, as they will only include pharmacies with the lowest costs and highest service levels. Limited networks are typically 50% to 80% smaller than an open network, usually having fewer than 20,000 pharmacies.
Open pharmacy network. In open networks, consumers’ co-payments and out-of-pocket costs are identical regardless of which pharmacy in the retail network dispenses the prescription. Open pharmacies are the most broad and often include the more than 60,000 retail pharmacies in the U.S.

by Smart Retailing Rx

Reference Pricing: Pharmacy Invoice Cost (ACTUAL) for Top Selling Generic and Brand Prescription Drugs

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform. 

The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC.  The bottom line; payers must have access to “reference pricing.” Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.

As of 2/6/2014 – Published Weekly on Thursdays

How to Determine if Your Company [or Client] is Overpaying
Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem.


Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month.

— Tip —

Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving. 

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization.  In this case, the market check language is effectually meaningless.

Pharmacy Network Reimbursement Rates

Although PBMs offer a very valuable service, they [we] are nothing more than middlemen; a person or company who helps two people or groups to deal with and communicate with each other when they are not able or willing to do it themselves.  

While most payers believe they have a “sweat” deal with their PBM, the truth doesn’t reveal itself until each party knows exactly what the other has invested, risked or remunerated.  As a payer, the contract you sign is often times much different from the contract between the PBM and other group or pharmacy. 

This difference in contract terms will lead to hidden cash flow for the traditional PBM and money left on the table by you!  Below is an actual provider contract between a PBM and our mail-order pharmacy, PrescriptionGiant.com.  The PBM’s company name is hidden to protect its identity. What, if anything, surprises you about this contract?

PBM Provider Agreement

There are far too many variables to address in PBM contracts for payers to achieve any reasonable level of transparency.  The solution; partner with only those PBMs willing sign and act as a fiduciary.

Reference Pricing: Pharmacy Invoice Cost (ACTUAL) for Top Selling Generic and Brand Prescription Drugs

Why is this document important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to healthcare reform. 

The costs shared below are what our pharmacy actually pays; not AWP, MAC or WAC.  The bottom line; payers must have access to “reference pricing.” Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.

As of 1/30/2014 – Published Weekly on Thursdays

How to Determine if Your Company [or Client] is Overpaying
Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.

Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our pharmacy cost then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem.


Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month.

— Tip —

Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving. 

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization.  In this case, the market check language is effectually meaningless.