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Merritt: Congress Considering Risky Changes to Federal Employees’ Health Benefits

Congress is considering risky changes to the popular Federal Employees Health Benefits Program that would disrupt prescription benefits for 8 million federal employees and retirees, reduce their choices and eliminate tools used by the program to save federal workers money.

The FEHBP Prescription Drug Integrity, Transparency and Cost Savings Act sounds promising at first blush. It promises more accountability, “transparency” and lower drug costs. However good its intentions, though, the bill uses an approach that would seriously undermine the ability of one of the nation’s best health benefits programs to continue preserving choice, quality, and overall affordability of prescription drug benefits. It would make FEHBP less able to accomplish its original goal of helping the federal government recruit and retain employees who might otherwise choose private-sector jobs with better benefits.

By any measure, FEHBP is a huge success. It has been routinely touted in the health reform debate as a national model for high-quality health care programs. A recent survey by the Office of Personnel Management, the agency administering FEHBP, found that federal employees are overwhelmingly satisfied with their current health benefits — by a 7-1 margin. This is significant, since pharmacy benefits are the most often used part of the program. The bottom line is that FEHBP offers prescription-drug benefit programs that are as good as or better than those offered by many Fortune 500 companies.

Nonetheless, the goal of this legislation is to force OPM to take FEHBP in an entirely different direction. It wants the program’s prescription drug benefits to operate less like those of savvy large employers and more like those of the Medicaid program for the poor. Currently, FEHBP relies on the same, sophisticated pharmacy benefit managers used by blue chip companies, Medicare Part D, and other successful programs to improve affordability. This bill would drive many well-regarded PBMs out of the program altogether and rely instead upon government price controls and micromanagement to do the job.

Practically speaking, this bill presents a number of challenges that could result in higher costs and fewer choices for federal workers:

• It eliminates many of the tools that are successfully used by FEHBP plans and PBMs to reduce drug costs and increase drug safety. It forbids PBMs from informing doctors and pharmacists when safer, more affordable drugs are available.

• It handcuffs PBMs’ ability to drive deeper drug discounts from drug companies and drugstores. By requiring plans to send FEHBP enrollees — for each and every prescription — the price paid to manufacturers for drugs and to pharmacies for dispensing them, the bill would effectively require PBMs to publicly disclose how they negotiate discounts from drug companies and drugstores throughout America. While the average consumer has little use for such information, drug makers and drugstores would find it immensely useful in their efforts to raise drug prices, according to the Federal Trade Commission, Congressional Budget Office, and numerous economists.

• It would require FEHBP to stop managing drug benefits like a Fortune 500 company and instead operate more like Medicare or Medicaid, which whatever their other virtues, are both on the verge of insolvency because of their inability to control costs. While state Medicaid programs use price controls on prescription drugs, they often bow to political pressure and pay two or three times more than PBMs pay drugstores. Meanwhile, for years Medicare underpaid participating primary care physicians, leading many doctors to drop Medicare patients altogether. Now Congress is forced to remedy the situation with a massive, unbudgeted increase in Medicare physician pay. Ironically, the one part of the Medicare program that is consistently popular and under-budget, is Medicare Part D, which, like FEHBP, relies on sophisticated PBMs, not arbitrary price controls.

• The bill would effectively ban some PBMs from participating in FEHBP. For example, PBMs that are partially owned by chain drugstores would be banned from the program, while PBMs owned by health plans would be forbidden from even making an operating margin. The reason? Not poor performance or consumer angst, but a suspicion among some in Congress that such PBMs might be “conflicted.” This unsubstantiated claim would surely be lost on those satisfied federal employees who are currently served by these PBMs and whose benefits would be disrupted because of this legislation.

Finally, the bill omits perhaps the most important thing of all: as a large purchaser, OPM already has the authority to implement each and every one of the bill’s provisions. OPM routinely demands new PBM contract requirements whenever it is convinced that it will improve FEHBP. For example, it has already required FEHBP carriers to insist that their PBMs meet rigorous transparency and cost-savings standards. Micromanaging FEHBP’s benefit design through legislation would undermine OPM’s flexibility to structure a benefit that reflects enrollees’ ever changing preferences.

The fact that neither OPM nor the federal workers it represents have asked Congress for this legislation should speak volumes.

Mark Merritt is president and CEO of the Pharmaceutical Care Management Association.

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