Impact on manufacturers
The "narrow network revolution" will affect pharmaceutical manufacturers' commercial activities, in the following ways:
» Narrow networks give more control to third-party payers. Today, a pharmacy's participation in a payer's narrow network is
based primarily on the pharmacy's willingness to accept reduced reimbursements. As these networks become more common, payers
will begin considering additional selection criteria linked to a pharmacy's compliance with a payer's benefit management plan.
For example, payers could select pharmacies with higher generic substitution rates or a greater willingness to block copay
» Narrow networks shift market share between payers. When negotiating for formulary access, manufacturers should be aware
how payers can leverage new network models to gain market share. In October 2010, Walmart and Humana launched this PDP with
4,200 preferred pharmacies (including Walmart, Sam's Club, Neighborhood Market, and Humana's RightSource mail pharmacy) and
58,000 non-preferred retail pharmacies. As of 2013, the plan is the fourth-largest PDP in the United States, with about 8
percent of all Part D enrollees.
» Narrow networks shift market share between trading partners. Existing programs can be disrupted or altered as networks evolve.
When Walgreens exited the Express Scripts network, rival pharmacies gained from Walgreens' sales losses. Until September 2012,
year-over-year sales declined by 10 percent to 15 percent at Walgreens pharmacies, while sales increased at the other chains.
CVS's retail pharmacies gained 6.5 million to 7 million new prescriptions from former Walgreens' customers. It expects to
retain 60 percent of these customers. Many other pharmacies also reported picking up new business from defecting Walgreens'
» Narrow networks teach consumers to shop for prescriptions by price. Thanks to prescription drug insurance, US consumers'
out-of-pocket expenses—cash-pay prescriptions plus copayments and coinsurance—account for less than 20 percent of total US
outpatient prescription drug spending. Historically, consumers have considered only service and location when choosing a pharmacy.
Narrow networks ask consumers also to consider which particular pharmacy has the lowest out-of-pocket cost. This trend accentuates
consumers' price sensitivity for prescriptions.