Medicare Part D plans have begun using preferred pharmacy networks in order to steer their beneficiaries to lower cost pharmacies. A key question is, does this work? A paper by Xu et al. (2022) aims to answer this question using 2011-2016 data. that compares Low Income Subsidy (LIS) Medicare beneficiaries and non-LIS beneficiaries. LIS beneficiaries have no or limited cost sharing which non-LIS individuals would be impacted if their Part D plan implemented a preferred pharmacy network. Using this approach, the authors find:
Unsubsidized Part D beneficiaries faced an average difference of $129 per year in out-of-pocket spending between using nonpreferred and preferred pharmacies, while subsidized beneficiaries were insulated from these cost differences. The implementation of preferred networks resulted in a 3.7-percentage point (95% CI: 3.3, 4.2) increase in preferred pharmacies’ claim share in the first year among the unsubsidized. Existing relationships with preferred pharmacies, the size of financial incentives, proximity to preferred pharmacies, and urban residence were positively associated with beneficiaries’ decisions to switch to these pharmacies.
The full article is here.