FEHBP PBM contracts: HR 4489 to reduce fraud and grant OPM greater power to audit

Feb 24 2010

The House Subcommittee for the Federal Workforce, Postal Service, and the District of Columbia heard testimony today on HR 4489, the “FEHBP Prescription Drug Integrity, Transparency, and Cost Savings Act.” The proposed bill would reform many aspects of how the Federal Employee Health Benefits Program (FEHBP) contracts with pharmacy benefit managers (PBMs) to provide prescription drug benefits to federal workers.

“Passing this bill would be a huge step in the right direction for the FEHBP”

“Passing this bill would be a huge step in the right direction for the FEHBP,” said Anna Burger, Chair of Change to Win. “Making the contracts for federal employees’ drug benefits more transparent could save the federal government and its employees hundreds of millions of dollars. This legislation should be a top priority for Congress, especially given how hard federal employees and taxpayers have been hit by skyrocketing health care costs.”

Testifying before the Subcommittee at today’s hearing was Change to Win’s Healthcare Initiatives Legislative Director, Jasmin Weaver. “This bill will reduce conflicts of interest and opportunities for fraud,” Weaver explained. “It will prohibit inappropriate drug switching, and it will give OPM greater power to audit and oversee FEHBP PBM contracts.”

New Poll Shows Federal Employees Report Dissatisfaction with Prescription Drug Prices

The FEHBP is the largest employer-sponsored health program in the country, covering eight million federal employees, retirees and their dependents. Despite its size and bargaining power, however, FEHBP currently spends 15-45% more than other federal programs for prescription drugs.

A recent poll of federal employees and their family members covered by FEHBP found that the overwhelming majority of respondents would like to pay less for prescription drugs. Commissioned by Change to Win, the poll found that 74% of FEHBP members surveyed think more should be done to lower the costs of their prescription drugs. 73% of plan members surveyed would support legislation aimed at lowering prescription drug costs and enhancing oversight of the FEHBP. Nearly a third of respondents reported that they were “completely unsatisfied” with the cost of their prescription drug coverage.

Other large federal government and state employee plans have achieved prescription drug savings through greater oversight of and improved transparency requirements for PBMs. The proposed House bill includes similar provisions for the federal employee program.

Problems with FEHBP's Largest PBM Contractor Highlight Need for Reform

The findings of a recent study from Change to Win – CVS Caremark’s Generic Rip Off – reiterate the need for PBM reform within the FEHBP. The report’s findings reveal that the FEHBP’s largest PBM provider, CVS Caremark, charges the US government and millions of federal employees more for hundreds of generic drugs than customers at CVS pharmacies who use no insurance.

A comparison of drug prices for federal employees covered by CVS Caremark through the Blue Cross Blue Shield Federal Employee Program (FEP) and prices for participants in CVS’s walk-in generics discount program revealed that the federal government and FEP participants together pay more for 85% of the drugs available through the company’s retail generics discount program.

Currently, companies that both manufacture drugs and own a PBM are prohibited from doing business with FEHBP health plans, and the proposed bill would extend the prohibition to companies that own both retail drugstores and a PBM. CVS Caremark currently operates under this model.

The House subcommittee is not alone in raising concerns about the joint PBM/retail pharmacy business model. CVS Caremark acknowledged in its 2009 third quarter earnings report that it is being investigated by the Federal Trade Commission (FTC). The FTC has received communications from health plans, independent pharmacists, consumer groups, five U.S. Senators and over a dozen members of the House expressing concern about the potential anti-competitive effects of the merged retail-PBM business model and the potential risks for consumers and health plans when such a large portion of the pharmaceutical supply chain is controlled by one company.

Alarmed About CVS Caremark is a Change to Win initiative to educate consumers, health plan managers and trustees about CVS Caremark, the country's largest pharmacy services company operating both a pharmacy benefits manager and a retail pharmacy chain. Our reports, CVS Caremark: An Alarming Prescription, CVS Caremark: An Alarming Merger and CVS Caremark’s Generic Rip Off detail the troubling patterns and new risks presented by CVS Caremark.

SOURCE Change to Win