New Bill Aims to Cut Federal Workers' Prescription Drug Costs

By on May 19, 2015 in Current Events with 70 Comments

Congressman Stephen F. Lynch (D-MA) has introduced the FEHBP Prescription Drug Oversight and Cost Savings Act (H.R. 2175), legislation aimed at improving federal oversight of the prescription drug benefits available to federal workers, retirees, and their families through the Federal Employees Health Benefits Program (FEHBP). The bill would also better ensure that program enrollees and the American taxpayer are receiving the best prescription drug benefit for their dollar.

According to the Office of Personnel Management (OPM), the FEHBP provides an estimated $45 billion in health care benefits per year and spends over $10 billion of that total on prescription drug costs alone. Despite the fact that prescription drug costs compromise nearly 30% of FEHBP premiums, the program’s pharmacy benefit and pricing structure has been subject to limited federal oversight.

In addition, in contrast to other federal programs, the FEHBP does not regulate or negotiate drug pricing for its enrollees. Instead, it relies on competition among its various carriers and so-called Pharmacy Benefit Managers (PBMs) to negotiate prescription drug benefits and maintain affordable prices.

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 FEHBP is even experiencing higher prescription drug costs than some non-federal and private sector programs.

The goal of the bill is to ensure federal employees get the best benefits for the best prices by giving OPM increased oversight authority of the FEHBP’s prescription drug contracting and pricing methods.

Among these oversight provisions would be a requirement that PBMs, who currently contract with individual insurance plans to provide FEHBP prescription drug benefits, return 99% of all rebates, market share incentives, and other monies received from pharmaceutical manufacturers for FEHBP business. In addition, the legislation would prohibit “drug switching” without prior physician approval, impose new disclosure and transparency requirements on PBMs in line with industry trends, and cap prescription drug prices paid by the FEHBP at the amount of the Average Manufacture Price.

“If we’re seeking responsible alternatives to addressing deficit reduction and reining in health care costs, strong oversight of the FEHBP prescription drug benefit would be a commonsense starting point,” said Congressman Lynch. “H.R. 2175 will serve to maximize cost savings and enhance the program’s ability to offer high-quality and low-cost prescription drugs for federal employees by enhancing oversight provisions that allow for alternative contracting and pricing mechanisms and mandating increased transparency. My legislation will lower federal employees’ out-of-pocket spending and the program’s operational costs which benefits both enrollees and taxpayers.”

© 2016 Ian Smith. All rights reserved. This article may not be reproduced without express written consent from Ian Smith.

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Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce. Ian also has a background in web development and does the technical work for the FedSmith.com web site and its sibling sites.

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