What is the relationship between the restrictiveness of a pharmacy network and the discounts available?

The correct answer highlights the concept that a more restrictive pharmacy network tends to yield better discounts for several reasons.

In a restrictive network, health plans often negotiate lower prices with a smaller number of pharmacies. By limiting the number of participating pharmacies, these plans can create a more competitive environment among the pharmacies that are included in the network. Pharmacies may be willing to offer deeper discounts to remain competitive and attract more patients within that network. Consequently, this can lead to increased cost savings for both the plan and its members.

Moreover, with a restricted list of pharmacies, plans can implement tighter controls and agreements regarding pricing, leading to more substantial negotiated discounts than what might be available in a less restrictive network where many pharmacies participate. In such cases, the competition is less fierce, which can reduce the incentive for pharmacies to provide significant discounts.

This principle is crucial in understanding how pharmacy benefit managers (PBMs) operate, as they strategically manage pharmacy networks to optimize both cost savings for the payer and accessibility for members, while engaging in negotiations that directly influence the available discounts.