Examining PBM Arguments Against Greater Transparency in the Federal Employee Health Plan


We recently took a closer look at the arguments offered by the top Washington lobby for pharmacy benefit managers (PBMs) against new legislation that would bring greater PBM oversight and disclosure to the Federal Employees Health Benefits Program (FEHBP) in an effort to reduce costs for patients and taxpayers.

At issue is H.R. 4489, the FEHBP Prescription Drug Integrity, Transparency and Cost Savings Act. The bill was the subject of a Congressional hearing earlier this week.

The Dose previously summarized the Congressional hearing and the arguments of H.R. 4489 supporters – U.S. Representatives, consumer and federal worker advocates, an industry expert and, of course, NCPA. What follows is an analysis by NCPA economist Devin Stone of the PBMs’ arguments:

PBM Claim #1: “the bill would not allow a drug substitution based on safety if the replacement drug were ‘higher in cost,’ even if concerns were raised about a generic company’s manufacturing practices as has happened in the past… The bill would also prevent pharmacies from substituting generic drugs without the approval of the prescribing doctor, despite state pharmacy laws requiring such substitution.”

Fact: The bill only prevents the PBM from proposing a drug substitution. Pharmacists still have the right to work with the physician and patient to promote drug substitutions for safety reasons. The bill simply ensures that decisions regarding medication regimens are made by the patient’s trusted local health care professionals.

Further, only switches that place the patient onto a costlier brand name drug are affected under the legislation; not drug substitutions that promote generics. It has been alleged that PBMs switch patients to costlier drugs in pursuit of brand name rebates to pad their profits.

PBM Claim #2: “By requiring plans to send enrollees, for every prescription, the prices paid to manufacturers for drugs and to pharmacies for dispensing them, the bill requires PBMs to publicly disclose their negotiated rates.”

Fact: The PBM does not have to provide the enrollee with any information regarding payments between the PBM and the pharmaceutical manufacturer; the PBM only has to disclose to the enrollee information regarding payment to the pharmacy.
Second, if it were true that letting pharmacies see what their competing retail chain pharmacies were being paid led to higher prices, than this would imply that the CVS Caremark merger has led to higher prescription drug costs for plans administered by Medco Health Solutions and Express Scripts.

PBM Claim #3: “Most prefer for the PBM to have an incentive to be aggressive negotiators by allowing PBMs to keep a portion of the savings they negotiate with manufacturers beyond the negotiated price.”

Fact: Under the legislation, PBMs would retain a percentage of rebates and thus still have an incentive to negotiate with manufacturers for greater rebates. Certainly, the bill’s proposed 1% commission on rebates is lower than the current, far higher portions pocketed by PBMs, which reportedly can reach 50%.

PBM Claim #4: “H.R. 4489 would also restrict the sale of any FEHBP-related claims or utilization data. Such restrictions on the sale of data would establish road blocks for legitimate real-time use of data. For example, PBMs provide utilization data to pharmaceutical manufacturers for federally required post-market surveillance of drug safety.”

Fact: PBMs still have the right to sell claims data. The bill simply requires that, prior to the sale, the PBM notify the Office of Personnel Management, the agency that oversees the FEHBP, of the reasons for selling the data, how the data will be used, and the payments that will be received.

PBM Claim #5: PBM transparency, such as in H.R. 4489, would raise drug prices for patients.

Fact: Advocates for consumers and union workers argue the opposite, both in the context of H.R. 4489 and the House and Senate-passed health reform bills. And recent experiences in the public and private sectors also demonstrate savings through transparency.

At Tuesday’s hearing, Argus Health Systems outlined what one lower-cost alternative for the FEHBP might look like. Argus is a pharmacy benefits administrator, or PBA, that offers health plan sponsors increased transparency when compared to large PBMs.

“Our customers receive unaltered claims data as submitted by the pharmacy,” said Jonathan Boehm, President and CEO. “This fully auditable access to data enables Argus’ customers to comprehensively manage their business for the benefit of their members. Consistently, our customers have told us that, when they transition to the Argus model from a traditional PBM business model they receive a reduction in prescription drug expense of between 8% to 10% on Day 1.”

Despite PBM scare tactics, it is important to keep in mind what the bill will accomplish for the FEHBP.

1.) Provides a level of transparency that greatly reduces the incentive for PBMs to engage in actions detrimental to health plans, patients, and taxpayers.

2.) Mandates that the PBM provide the health plan with all information regarding payments between pharmaceutical manufacturers and the PBM while preserving the confidentiality of the information. Given the greater scrutiny regarding payments between pharmaceutical manufacturers and physicians, this bill ensures that the OPM has knowledge of all financial incentives that may influence PBM decisions regarding which drugs are made available under the health plan.

3.) Prevents the PBM from lobbying physicians to switch patients onto more expensive brand name medications.

4.) Provides FEHBP patients an explanation of benefits for all drugs purchased, so that the patient has full knowledge of the financial cost of the drug to the health plan, and to themselves. Such transparency is a minimal requirement in order for patients to play a greater role in making informed decisions to lower their prescription drug costs.

5.) Requires the level of transparency necessary for the OPM and the Office of Inspector General to determine if the FEHBP membership is getting the best ‘deal’ for its money.

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