Lawmakers seek better oversight of federal workers’ prescription drug benefits

Proposed legislation aims to save money by expanding regulation of the prescription drug benefits available to federal employees.

Rep. Stephen Lynch, D-Mass., on Wednesday introduced a bill (H.R. 979) that would increase oversight of pharmaceutical benefit managers, the third-party negotiators whom critics claim are primarily responsible for higher prescription drug prices.

The bill, which is similar to legislation Lynch sponsored in January 2010, would mandate strict regulations for PBMs, including prohibiting pharmaceutical benefit managers from switching drugs without a physician's approval, requiring PBMs to return to the federal plan almost all proceeds from rebates and incentives from drug manufacturers, and creating stronger disclosure requirements.

The legislation also would prohibit drug manufacturers or retail pharmacies that have a controlling interest in a PBM from participation in the Federal Employee Health Benefits Program.The Office of Personnel Management, which oversees the program, would be required to exclude a health care carrier that has a controlling interest from earning a profit through an FEHBP contract. Each carrier would be required to certify annually that it is in compliance with all established PBM restrictions.

"FEHBP prescription drugs cost 30 percent more than those procured through other federal programs like TRICARE," said Rep. Gerry Connolly, D-Va., who co-sponsored the bill. "H.R. 979 would save as much as $3 billion by opening up the prescription drug purchasing process, in which drug company middlemen sell to the federal government at inflated prices. The end result is lower drug prices for those enrolled in FEHB plans."

Colleen Kelley, president of the National Treasury Employees Union, praised the legislation, noting OPM should take stronger actions to address drug pricing issues, especially the disparity between FEHBP and other federal programs.

"Rising prescription drug prices are a major factor pushing health care costs higher for federal employees, retirees and their families," Kelley said. "Approval of this legislation would be an excellent step forward in addressing this serious issue."

The Pharmaceutical Care Management Association, an industry group representing PBMs, has expressed opposition to the provisions in the bill. In a poll of Washington-area federal employees released last spring, PCMA found that 83 percent of workers were satisfied with their benefits, and most preferred to choose a plan regardless of whether they were owned by a pharmacy chain.

If enacted, the 2011 FEHBP Prescription Drug Integrity, Transparency and Cost Savings Act would require OPM within six months to issue interim final regulations outlining the changes to the FEHBP. The new provisions would apply after Jan. 1, 2012.

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