Congress

New bill aims to improve oversight of FEHBP prescription drug benefits

Rep. Stephen Lynch (D-Mass.) introduced a new bill that would improve federal oversight of the prescription drug benefits of federal employees and retirees and ...

Michael O'Connell@moconnellWFED

May 18, 2015 6:30 pm

3 min read

A new bill introduced by Rep. Stephen Lynch (D-Mass.) would improve federal oversight of the prescription drug benefits that federal employees, retirees and their families receive through the Federal Employees Health Benefits Program (FEHBP).

The Office of Personnel Management reports that FEHBP provides an estimated $45 billion in health care benefits annually. Of that, the program spends more than $10 billion on drug costs, which account for nearly 30 percent of FEHBP premiums.

Unlike other federal programs, FEHBP does not currently negotiate or regulate the drug pricing for those enrolled in the program. Instead, it relies on competition among Pharmacy Benefit Managers (PBM) and the program’s various carriers to keep the drug prices affordable.

OPM estimated that FEHBP is paying between 15 percent and 45 percent more for prescription drugs than other federal agencies, including the Veterans Affairs and Defense departments.

The FEHBP Prescription Drug Oversight & Cost Savings Act (H.R. 2175) seeks to turn that around by increasing OPM’s oversight authority of FEHBP’s prescription drug contracting and pricing methods. It would require that PBMs return 99 percent of all of the rebates and market share incentives it receives from pharmaceutical manufacturers for their FEHBP business. It would also require the PBMs to receive prior approval from a physician before switching a patient’s prescription drug and cap prescription drug prices at 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 Lynch, in a press release. “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.”

The American Federation of Government Employees (AFGE), the National Treasury Employees Union (NTEU) and the Federal Managers Association have already voiced their support for H.R. 2175.

“AFGE strongly supports legislation introduced by Rep. Stephen Lynch of Massachusetts that would increase federal oversight of the Federal Employees Health Benefits Program,” AFGE National President J. David Cox said, in a release. “The 8.2 million federal employees, retirees and family members currently receiving health care through the FEHBP pay substantially more for their prescription drugs than other federal insurance programs and even some non-federal and private-sector programs.

“Rep. Lynch’s bill would ensure enrollees don’t pay more than the average wholesale cost for prescription drugs and provide the Office of Personnel Management with more oversight of contracting and pricing methods for prescription drugs. As health care costs continue to climb, the government should be doing everything it can to reduce out-of-pocket costs for enrollees, and this legislation is a good step in that direction.”

NTEU National President Colleen Kelley echoed Cox’s sentiments, saying “It’s time to make FEHBP the model for prescription drug purchasing and disclosure.”

Committee on Oversight and Government Reform Ranking Member Elijah E. Cummings (D-Md.) and Rep. Eleanor Holmes Norton (D-D.C.) are co-sponsoring the bill with Lynch.

OPM wants to keep FEHBP premium increases ‘in check’