By Devin Stone
What do Senators, post office employees, and other government workers enrolled in the Federal Employee Health Benefits Program (FEHBP) have in common? They all apparently pay higher prices for generic drugs than uninsured patients when shopping at a CVS Caremark retail pharmacy location.
A startling new report by Change to Win analyzed prescription drug prices for enrollees in the FEHBP against the prices paid by uninsured patients that are enrolled in CVS Caremark’s Health Savings Pass (HSP) program. Change to Win found that FEHBP enrollees paid more on 85% of all drugs that are currently covered under CVS Caremark’s HSP.
It is important to note that the HSP cannot be used in conjunction with a patient’s current insurance. That means that FEHBP enrollees are not allowed to join the program. Therefore, FEHBP enrollees are forced to pay higher prices when using a CVS Caremark, which not only hurts the pocket books of patients, but costs the taxpayer more as well. According to Change to Win, for the drugs Levothyroxine, Lisinopril, and Metformin alone, the FEHBP overpaid annually by $32 million.
The games played by CVS Caremark don’t simply stop there. Located in the Change to Win report is a 16-page appendix of the prices paid by FEHBP enrollees. It’s important to remember that CVS Caremark is a pharmacy, as well as a pharmacy benefit manager (PBM). As a PBM, the company is responsible for negotiating with health plans to determine the cost of prescription drugs to the plan. It is also responsible for negotiating with other pharmacies, such as Walgreens and Wal-Mart, to determine how much these pharmacies will be reimbursed for services rendered. In the case of smaller, independent community pharmacies, it’s almost always much more of a take-it-or-leave-it contract offer than a negotiation.
Since PBMs act as both claims administrator, as well as a dispenser of medications through their mail order pharmacies (and retail pharmacies in the case of CVS Caremark), PBMs are the only companies in America that are able to effectively set prices for their rivals. As an example, take the drug Meftormin HCL, 1000mg.
Now, the cost to a pharmacy to acquire and dispense a medication is virtually the same regardless of the health plan that a patient is covered under, which means it’s legitimate to compare the price of a drug under the FEHBP against prices paid to independents under other health plans managed by CVS Caremark. Under the FEHB Standard Option Plan, it would cost the government $31.23 to purchase 180 tablets of Meftormin HCL, 1000mg from a CVS Caremark chain pharmacy. Based upon information made available to NCPA, under a typical independent community pharmacy contractual agreement with CVS Caremark, had that same prescription been purchased at an independent community pharmacy, the pharmacist would have been reimbursed $15.90. In other words, the independent community pharmacy is reimbursed less than the CVS Caremark chain pharmacy.
Here’s the catch, because CVS Caremark has to negotiate with the health plan to determine how much it will be billed for the prescription, CVS Caremark can negotiate contracts that penalize patients and health plans for not using a CVS Caremark pharmacy. For the independent community pharmacist that would have been reimbursed $15.90, the health plan would have been billed $69. Because CVS Caremark determines how much the health plan will be billed for using a rival pharmacy, CVS Caremark has the ability to prevent their own chain pharmacies from ever having to compete with less expensive independents. Although such a practice subverts the free market, leading to higher costs to patients, there are no laws making this practice illegal, either under private insurance plans or under the FEHBP.
So why hasn’t transparency been put in place to ensure that the federal government is getting the best plan for its money? It’s not for lack of trying. FEHBP is administered by the Office of Personnel Management. Its Inspector General expressed frustration to Congress about the agency’s being denied access to data by PBMs, saying: “There’s a good chance we’re not getting a good deal because of the lack of transparency.”
So who objects to the bill? You guessed it, the PBMs. Their top lobby claims that transparency will increase costs because,
“The legislation would force mandated disclosure of sensitive pricing information, giving the upper-hand to drug makers and drug stores to charge higher prices at the expense of federal employees.”
However, the legislation specifically states that, “information disclosed by a health benefits plan or PBM” would be considered “confidential and shall not be disclosed by the Office or by a plan receiving the information.”
Simply put, nothing in the bill would allow drug makers or drug stores to access sensitive pricing information. Instead, requiring CVS Caremark and other PBMs to disclose to the federal government information regarding how much pharmacies are paid will allow the federal government to better negotiate contracts that are in the best interests of patients and taxpayers.