Roll Call Row Over Feds and PBM Transparency

Bruce Roberts’ February 8 column on savings for federal workers and taxpayers through greater oversight of pharmacy benefit managers (PBMs) triggered a lively discussion on the Web site Roll

The groundswell of support for PBM transparency from Members of Congress, consumer and labor advocates, public/private payers and community pharmacists has delivered the issue from relative obscurity to the stuff of hearings, legislation and The Washington Post.

The focus of the Roll columns has been U.S. Rep. Stephen Lynch’s H.R. 4489, “The Federal Employees Health Benefits Program (FEHBP) Prescription Drug Integrity, Transparency, and Cost Savings Act” – and the subject of a subcommittee hearing last month.

NCPA economist Devin Stone recently examined the latest installment of the fourpart series on Roll The arguments against H.R. 4489 are presented verbatim in quotes followed by Devin’s analysis:

“The bill rests on the assumption that Blue Cross, Aetna, United, Humana and other insurance firms are grossly incompetent in contracting for drugs.”

Each of these health plans is negotiating in a market where they are prevented from accessing the critical information they need.  PBMs are against transparency that will benefit health plans, because they are fighting for their bottom line.

“David Balto wrote in Roll Call, ‘it is estimated that the FEHBP costs 15 percent to 45 percent more than any other federal drug benefit program,’ an estimate asserting billions in waste. If these claims are accurate, there is indeed a serious problem.   Just where do these estimates come from? Not from any Government Accountability Office study. Not from any inspector general study. Not from any Congressional Budget Office study. Not, in fact, from any expert source.”

The statistic is from the United States House Committee on Oversight and Government Reform’s Federal Workforce, Postal Service and the District of Columbia Subcommittee.

“At the hearing, Change to Win, the union organization, complained that Blue Cross enrollees are paying more than the uninsured under a charity program run by CVS Caremark. Quite apart from this absurd comparison, its study ignores the mail order program under which Blue Cross Standard Option enrollees get most maintenance drugs at lower costs.”

CVS Caremark as a retail pharmacy has a financial incentive at stake to charge the highest price possible to the health plans that they serve.  This runs counter to its duty as a PBM to negotiate lower prices with retail pharmacies.  The fact that the FEHBP with its 8 million employees was unable to use its leverage to ascertain prices similar to what is offered to any individual off the street, represents a massive failure to get the best contract possible for taxpayers.

“A June 24, 2009, subcommittee hearing on FEHBP drug costs actually rebutted Lynch and Balto. A witness from the Department of Defense testified that from 2000 through 2008, total TRICARE pharmacy drug costs grew from $1.6 billion to $6.9 billion, fourfold on a per-enrollee basis.”

To combat this sharp increase in spending, the DoD implemented greater transparency in TRICARE through the National Defense Authorization Act of 2008.  TRICARE anticipates savings of $1.67 billion through greater transparency and through negotiating rebates directly with PBMs.

“The bill would debar CVS Caremark and other firms that combine PBM and pharmacy functions from contracting with any FEHBP plan”

PBMs should have been banned from owning pharmacies years ago.  Since PBMs set prices for the pharmacies they own and for the community pharmacies that they are in competition with, these PBMs are able to prevent competition that would benefit health plans and payers.

“and would prohibit health-based drug substitution recommendations that did not lower costs.”

Only PBMs are prevented from recommending substitutions.  Pharmacists still have the power to propose substitutions, thereby ensuring that health decisions are made by local health care professionals and not PBM bureaucrats.

“The net effect of these restrictions would be to reduce competition (many PBMs would not or could not bid on FEHBP plan contracts),”

According to the Pharmacy Benefit Management Institute there are over 40 PBMs. Many of them would be able to bid on FEHBP plan contracts.

Nobody can envision a world where airplane tickets, groceries, or clothing is purchased without the price being known to the consumer.  Yet PBMs for decades have been able to game the system where patients have no knowledge of the real prices being paid, thus preventing health plans from ever knowing if they are getting the best deal for their money.

The legislation simply provides the U.S. Office of Personnel Management (OPM) and the FEHBP the minimal amount of information necessary to crack down on the games played by PBMs that leave taxpayers and patients with higher bills for prescription drugs.

OPM’s Inspector General is presumably one of the most informed individuals about the particulars of the FEHBP drug benefit and he continues to lobby forcefully for greater transparency and accountability from PBMs. At the Feb. 23, 2010 congressional hearing he renewed that push:

“In our estimation, the single most important FEHBP issue which OPM must resolve is the fact that it is dealing with PBMs from a perspective in which the cost structures of the PBMs are utterly nontransparent. This means that there is no objective basis to determine whether the terms being offered to an FEHBP carrier by a PBM represent an advantageous arrangement. From our perspective as the agency’s audit component, we find the absence of transparency to be deeply troubling.”

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