Never let it be said that Walmart doesn’t know marketing. In the aftermath of the CVS/Caremark/Walgreens turf battle, where the question of adequate member access was raised (Networked), Walmart jumps right back into the frey and releases their low-price network option. They are referring to it as *Access Based Network Design* and are touting it as a new strategy to “create a break in the cost curve and slows future cost increases by applying downward pressure on cost. How, one might ask? At WBC (www.wbcbaltimore.com), we know the answer. It’s by finding the right-sized network to fit the access needs of the payor.
Walmart bases this strategy on three tenets of pharmacy cost containment:
- Leverage supply and demand to create competition among pharmacy providers;
- Build the right-sized network from the “bottom-up” determining the number of pharmacies the payor’s population needs rather than the number of pharmacies out there; and
- Offer financial incentives to plan members to influence steerage and offset any disruption or inconvenience.
Sounds promising so far. I mean, is there really any reason to offer a 60,000+ store network? In some markets, there is literally a network pharmacy on every corner. Most plan sponsors can get along just fine with a much smaller offering, something in the 20,000 store range. Walmart makes the case that, rather than having incentives to keep prices as high as possible without getting kicked out of the network, the Access Based Network aligns the pharmacy’s interest with the payors, competing to be included by reducing their prices.
Building a right-sized network may be easier than the plan sponsor has been led to believe and without major disruption to their members. Medicare, for example, has established an access standard that can prove very instructive for a commercial plan sponsor. The Medicare standard is:
Urban Access– On average, at least 90 % of Medicare beneficiaries who live in an urban area must have access to a network pharmacy within 2 miles of their home.
Suburban Access – On average, at least 90% of Medicare beneficiaries who live in a suburban area must have access to a network pharmacy within 5 miles of their home.
Rural Access– At least 70% of Medicare beneficiaries must have access to a network pharmacy within 15 miles of their home.
As mentioned above, this standard can almost always be met with 20,000 or less pharmacies!
The financial incentives to members can be the final piece that puts this type of strategic plan design in play. A reduced co-pay to offset any inconvenience of driving a few more blocks could do the trick. Many times, it does not have to be a huge enhancement. Walmart suggests that a $10 co-pay could be reduced to $7, for example.
WBC has been a big proponent of right-sized networks for some time and this organized effort by Walmart is an aggressive step in the right direction. That being said, Walmart does not hold an exclusive with this type of concept. Keep in mind they are not trying to become a PBM. They promote their efforts as PBM-agnostic. Just about any PBM worth their salt can design and manage a selective network of this type. We think you’ll find it’s worth discussing with your PBM.
