Exclusion from Preferred Pharmacy Networks Significantly Increases Closure Risk, Study Reveals

A recent study published in Health Affairs highlights that retail pharmacies excluded from Medicare Part D preferred networks face a substantially higher risk of closing over the past decade. The research, conducted by the USC Schaeffer Center, indicates that pharmacies not included in these networks are up to 4.5 times more likely to shut their doors compared to those actively participating.

The study underscores disparities in network participation, revealing that independent pharmacies and those situated in low-income, Black, or Latino communities are disproportionately excluded from preferred networks, placing them at a greater threat of closure. Specifically, pharmacies that are not designated as preferred by any Part D plan are over three times more likely to close, with those completely out of network facing an even higher risk.

Data shows a significant expansion of preferred networks, with their use tripling in Medicare Advantage plans—from 44% to 98%—over the last ten years. This growth coincides with major mergers among Pharmacy Benefit Managers (PBMs) and large retail chains, which appears to incentivize guiding patients toward affiliated pharmacies while excluding competitors.

Such policies have led to a landscape where fewer pharmacies, especially in underserved neighborhoods, meet preferred status, aggravating access issues. For example, in diverse states like New York and North Dakota, less than one-third of pharmacies are preferred by most plans. The problem is particularly acute in minority and low-income communities, where a smaller proportion of pharmacies hold preferred status.

This trend raises concerns about the sustainability of local pharmacies and highlights the need for federal reforms. Experts suggest that regulators could enforce standards for pharmacy access, increase reimbursement for critical pharmacies, and restrict PBM practices that create narrow networks designed to favor specific chains.

Senior scholar Dima Mazen Qato emphasizes the importance of addressing these network restrictions to prevent further closures and ensure equitable access to pharmacy services across all communities. The findings advocate for policy interventions to curb the adverse effects of rising preferred network dominance and protect vulnerable populations' healthcare access.

For more insights, refer to original research.