More pitfalls appear in Part D contracts

August 8, 2005

The Medicare Part D prescription drug benefit remains on track to debut next Jan. 1, but questions abound. Independents and smaller chains worry about access as pharmacy benefit managers and prescription drug plans (PDPs) pressure pharmacies to sign preferred provider network contracts.

The Medicare Part D prescription drug benefit remains on track to debut next Jan. 1, but questions abound. Independents and smaller chains worry about access as pharmacy benefit managers and prescription drug plans (PDPs) pressure pharmacies to sign preferred provider network contracts.

Larger chains and PBMs worry about being squeezed out by even larger competitors with their own mail-order operations. PBMs and PDPs of all sizes worry about building pharmacy networks that meet TRICARE access requirements originally designed for relatively concentrated military populations.

"CMS [the Centers for Medicare & Medicaid Services] is building something that has never been done before," said Buck Stevens, senior VP at http://www.pdxinc.com, a nationwide PBM and pharmacy software provider. "They are putting rules together on the fly. Pharmacies need to go into this with their eyes open and understand the possible pitfalls."

"CMS has said to us and to plans that any-willing-provider language doesn't have a time limit," said John Coster, VP of policy and programs for the National Association of Chain Drug Stores. "If you have not joined the network by Aug. 1, you can join any time after that as long as you accept the same terms."

Patient access standards for Part D are clear, noted John Rector, senior VP of government affairs and general counsel, National Community Pharmacists Association. Plans serving rural areas must provide at least one community pharmacy within 15 miles of 70% of the population. Suburban plans must have a pharmacy within five miles of 70% of residents, and urban plans must have a pharmacy not more than two miles from 70% of people in the coverage area. "Plans can't count mail order for those standards," he added. "They must have enough community pharmacies to meet the requirements."

Pharmacy access to mail order is less clear. Coster said CMS is allowing plans to limit community pharmacy participation in mail programs. "If a pharmacy is willing to provide a 90-day supply at the same cost to CMS as mail order, it should have that opportunity," he said.

In practice, Stevens said, plans are limiting mail-order participation. Some plans have rejected mail-order applications by http://PDX-Rx.com/ on be half of their client pharmacies. Other plans declined to provide applications or contracts. Keeping community pharmacies out of mail programs keeps more manufacturer rebates and discounts flowing to plan sponsors, he explained.

Not being able to serve as mail-order providers could be a financial disaster for nonparticipating pharmacies, Stevens said. Many, perhaps most, Rx patients who now pay cash will be eligible for Part D. If they opt into Part D and use mail order for chronic medications, community pharmacies will lose their most profitable patients.

In mid-July, NCPA offered its members four points to consider before signing any Part D contract: First, pharmacies should be sure reimbursement rates and dispensing fees cover the store's actual cost of dispensing. NCPA noted that in 2004, average estimated dispensing costs ranged from $7.95 in New England to $13.17 in Pacific Coast states.

Second, pharmacies should watch out for "most-favored-nations" provisions. The provision requires pharmacies to give the Part D plan sponsor the lowest reimbursement rate accepted from any payer.

Third, look for opt-out clauses. Some plan sponsors automatically enroll pharmacies in their Part D network unless the pharmacy proactively declines to participate.