Bill would cut prescription drug costs for feds

Thursday - 3/17/2011, 5:34pm EDT

By John Buckner
Federal News Radio

Rep. Stephen Lynch (D-Mass.) reintroduced a bill last week that would cut prescription drug costs for feds under the Federal Employees Health Benefits Program (FEHBP).

"This bill will lower federal employees' out-of-pocket spending and the program's operational costs resulting in a win-win for both federal employees and taxpayers," said Lynch during a House Oversight and Government Reform Committee hearing Wednesday.

Lynch's new bill is similar to his 2010 proposed legislation, H.R. 4489, which focused on transparency of monetary issues between Pharmacy Benefit Managers (PBM) and drug providers.

The new legislation includes:

  • Maximum prices -- Lynch's bill mandates that a carrier may not pay a PBM more than the average manufacturer's price for any drug.
  • Transparency -- In addition to requiring stricter fiscal measures on PBMs and drug retailers, Lynch's bill is also requiring increased transparency. The bill requires PBMs to contact an enrollee within 90 days of dispensing a prescription drug.
  • Changing contract requirements -- Lynch's bill prohibits PBMs from having a controlling interest in retail pharmacy as well as prohibiting retail pharmacies from controlling interests in PBMs. The bill also gives the Office of Personnel Management the ability to terminate any contract where control issues are evident between a PBM and retail pharmacy.
  • Drug substitution restrictions -- Lynch included in his bill that drug substitutions can be made but generic brands cannot be used as substitutes. Before an alternative is approved, a PBM must make sure it is the least costly drug in its class.
  • Reimbursement of carriers -- Lynch's bill requires a PBM "pay to a carrier an amount that is at least 99 percent of the sum" of all compensation and rebates the PBM received by the last day of each quarter under the contract.
  • Spread Pricing -- The bill also prohibits PBMs from charging a carrier more for a drug than what the PBM plans to reimburse the carrier. Disclosures on the reimbursement process are required and changes must be announced within 30 days of the arrangement.

PBMs would be required to provide information on a drug including the dispensing date, its strength and the quantity, and notify an enrollee of how much they paid, how much was paid to the pharmacy by the PBM, and the amount paid to the PBM by the carrier. Also, a PBM would be required to provide contracts to OPM upon request. Any information disclosed by a health benefits plan or PBM would be confidential and only seen by OPM.

The bill has gained support from at least one federal employee union, the National Treasury Employees Union (NTEU), which is calling for increased oversight of the PBMs who negotiate with drug manufacturers.

"Approval of this legislation would be an excellent step forward in addressing this serious issue," said NTEU president Colleen Kelley in a release last week.

Lynch's reintroduced bill, H.R. 979, has been referred to the House Oversight and Government Reform Committee for review.

John Buckner is an intern with Federal News Radio.

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