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Francis: ‘Where’s the Beef’ in Claims That Employee Health Plans Overspend on Drugs?

In Guest Observer columns in recent weeks, Mark Merritt of the Pharmaceutical Care Management Association and David Balto of the Center for American Progress exchanged views on proposed Federal Employee Health Benefits Program legislation (H.R. 4489). The premise of this bill is that FEHBP-participating insurance plans overspend on prescription drugs because the Pharmaceutical Benefits Management firms with which they contract overcharge them. The bill rests on the assumption that Blue Cross, Aetna, United, Humana and other insurance firms are grossly incompetent in contracting for drugs.The House Oversight and Government Reform Subcommittee on Federal Workforce, Postal Service, and the District of Columbia held a hearing on the bill on Feb. 23. Chairman Stephen Lynch (D-Mass.) claimed that savings of as much as $1 billion a year would result from reform. 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.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. According to the Washington Post’s Joe Davidson, CVS says that Change to Win’s motive is to punish CVS over the “card check” union election issue. So the sum total of evidence for these claims of vast waste in the FEHBP is an advocacy organization’s erroneous study and Balto’s anecdotes about savings states make from reforming their own wasteful contracts.Balto also quotes an Oversight and Government Reform majority staff report on Part D that says, “if Medicare negotiated directly with drug manufacturers ... the potential savings to taxpayers increases to $156 billion.” This conclusion is irrelevant to the proposed bill, which does not authorize negotiations by the FEHBP. Regardless, the credibility of such assertions died when the CBO scored direct government negotiation as saving nothing compared with the use of PBMs by private plans.

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