California insurer proposes pharmacy network

People have talked about provider networks, and how visiting some in-network facilities can lead to surprise out-of-network charges. Much less common has been insurance companies trying to limit where patients can get their medications. Kaiser Health News reported on Blue Shield of California's proposal to do just that.

The recent dramatic rise in drug prices has featured in the news. As insurers try to contain costs for their members, it makes sense for them to address the cost of medications. Preferred pharmacy networks, however, seem like an inefficient way of doing so. Preferred networks impose some non-financial costs. For example, patients might need to go further to a pharmacy or, as noted in the article, might be required to sever a personal relationship with a pharmacist in order to obtain in-network pricing. Reference pricing, coupled with an easily searchable online database of prices, seems like it would be a more effective approach. The insurer can publish the amount that it it willing to pay for each medication, along with prices from pharmacies. Patients can then choose to go to pharmacies that offer the medications for less, or they can choose to pay the difference for convenience, relationship, or any other priority. This approach has the advantage of applying competitive market pressure on each individual medication, which is far more granular than each pharmacy business relationship. Reference pricing has had some positive results when applied to procedures; there seems to be little reason that it wouldn't also be effective in the realm of medications.