Congressman Stephen Lynch (D Mass) who chaired the House Oversight and Government Reform Committee when Rep. Nancy Pelosi was Speaker has reintroduced his “FEHBP Prescription Drug Integrity, Transparency, and Cost Savings Act” (HR 1367). Back in 2010 OPM responded to the bill by imposing very strict transparency requirements on contracts between nationwide fee for service plan carriers and prescription benefit managers. OPM’s rules require that the PBMs charge actual costs for prescriptions drugs both at retail and at mail / home delivery and credit the plans for all rebates and related revenues. These rules have been implemented.
Govexec.com reports that “Pharmacy claims account for about 30 percent of FEHBP premiums, according to OPM. This equates to more than $10 billion annually, Lynch said.” The prescription drug spend in the FEHBP like all employer sponsored programs is a large dollar amount. However, the prescription drug spend percentage for the FEHBP is skewed by the fact that the FEHBP has a very large cadre of annuitants whose hospital bills are paid by Medicare Part A. FEHBP pays their prescription drug bills. That’s not a bad deal because hospital costs still outweigh prescription drug costs. If you were to add the hospital bills that Medicare pays to the total FEHBBP benefit spend, the drug spend percentage would drop significantly. The FEHBP expects that the percentage would be in line with other employer sponsored plans, considering the fact that the average age of a FEHBP enrollee is around 60. The sky is not falling.
Congressman Lynch’s press release comments that “Regrettably, the FEHBP is paying between 15% and 45% more for its prescription drugs than other federal programs, including those at the Veterans Administration, the Department of Defense, Medicare, Medicaid, and the Public Health Service’s 340B Program.” The FEHBlog cannot vouch for any percentages but he knows that these public health programs like the VA and Medicaid, clamp down hard on utilization by using closed formularies and other common techniques. Cutting back on choice is how drugs costs are controlled, but the unions, NAGE and AFGE, who wildly support Congressman Lynch’s bill, would have a bird if FEHB plans adopted the same techniques. Always be careful what you wish for.