Providing Better Healthcare For Federal Employees

February 05, 2010

As appeared in Roll Call
By Bruce T. Roberts, RPh
Executive Vice President and CEO
National Community Pharmacists Association 

'What's good for the goose is good for the gander' is an old adage that should apply to pharmacy benefit managers (PBMs), which are responsible for administering many prescription drug plans. Using the justification of ensuring pharmacies are an honest broker in the delivery of these services, PBMs routinely and aggressively audit their books and retract money from the pharmacy whenever they can. However, turn about is not fair play, as PBMs routinely deny health plan sponsors similar access to their business dealings. This needs to stop, and a good starting point is with the Federal Employees Health Benefits Program (FEHBP) for federal employees, dependents and retirees. 

That's why Congressman Stephen Lynch (D-MA) recently introduced H.R. 4489, the FEHBP Prescription Drug Integrity, Transparency, and Cost Savings Act. The subject of a Congressional hearing this month, it could serve as a model for other health plans and expose the litany of secretive shell games that seemingly increase PBM profits at the expense of plan sponsors, patients, and pharmacies. 

For example, since PBMs manage the formularies that determine what prescription drugs can be used for health plans, drug manufacturers will pay them rebates for promoting certain brand name drugs over others. The PBMs retain large shares of these payments before passing whatever might be left on to plan sponsors. The more the "preferred" drug is dispensed, the greater the rebate revenue for the PBM. This can lead to profit-driven coverage decisions that favor pricier name brand drugs over more inexpensive generic drugs. Little, if any, of this is disclosed to plan sponsors or patients. 

In his capacity as Chair of the House Subcommittee on Federal Workforce, Postal Service and the District of Columbia, Rep. Lynch previously held a hearing examining the largest FEHBP contract with the giant merged PBM, pharmacy chain and mail order pharmacy CVS Caremark (Medco Health Solutions is a PBM and mail order pharmacy with a smaller role). At the time, Rep. Lynch said, "It's a scam of major proportions. When we're trying to find billions of dollars to fund health care reform, this is an area that absolutely has to be cleaned up." H.R. 4489 would empower the Office of Personnel Management (OPM) with increased oversight over the PBMs for FEHBP, which has seen its cost soar 69 percent in the last eight years. It would:

  • Provide OPM with access to reports on the rebates collected from drug manufacturers, and require PBMs to "pass through" 99% of rebates and other compensation earned on behalf of plan members.
  • Halt PBMs' practice of reimbursing mail order pharmacies (which they own) at a higher rate than they would reimburse community pharmacies for the same prescription.
  • Stop PBM "drug switching" unless the change is approved by the provider and results in actual savings to the plan and patient.
  • End the obvious conflicts of interest of a manufacturer exerting a controlling interest in a PBM or when a PBM owns a controlling interest in a retail pharmacy, which is most egregious in the case of CVS Caremark.
  • Prevent PBMs from forcing participating pharmacies into certain contract terms as a condition of participating in a particular pharmacy network.
However, the bill could be improved. It caps the amount the carrier plan may pay a PBM for a prescription drug at the drug's average manufacturer price (AMP). AMP does not come close to the retail pharmacy acquisition cost of a prescription drug. Further, PBMs would likely keep part of the AMP payment made by the carrier. GAO studied a similar AMP proposal in Medicaid and concluded it would pay pharmacies 36% below their costs. 

Rather than dispensing drugs at a significant financial loss, pharmacies might be forced to leave the FEHBP program, undermining patient access. In addition to more equitable reimbursement, we urge including a provision protecting pharmacies from aggressive and unnecessary auditing practices of PBMs. 

A new report from Change to Win, a labor coalition, illustrates the costs of the current system. They found that FEHBP patients paid more on 85% of all drugs that are currently covered under CVS Caremark's Health Savings Plan (HSP) for the uninsured. In other words, according to the survey, patients without insurance paid less for these drugs than FEHBP patients shopping at a CVS with CVS Caremark-administered coverage! 

By taking the best aspects and strengthening others, Rep. Lynch's bill can make the FEHBP more cost-effective, transparent, and practical. Across the U.S., public and private sponsors of health plans are reducing costs by adopting similar policies demanding better transparency. TRICARE estimates savings of $1.67 billion; New Jersey projects savings of $559 million over six years; and Texas estimates cutting costs by $265 million. 

This important step will mean what's good for the goose is truly good for the gander. 

The original article can be found on Roll Call.

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