FEHBP pharmacy changes stir up controversy

Proposal to bring all drug benefit negotiations in-house goes to super committee but draws some opposition.

The deficit reduction super committee is set to consider changes in the way federal employees' pharmacy benefits are negotiated, but some observers say the move could limit access to drug choices.

As part of his broader cost-savings package, President Obama last month announced a proposal that would streamline pharmacy benefits available under the Federal Employees Health Benefits Program by allowing the Office of Personnel Management to negotiate prices for all program participants. Currently, health plans participating in FEHBP contract with pharmacy benefits managers, who negotiate with drug manufacturers and pharmacies on behalf of their enrollees. Under Obama's proposal, which the administration estimates would save $1.6 billion over 10 years, OPM would work with a single pharmacy benefit manager.

Lawmakers have long supported changes to the government's prescription drug program. Rep. Stephen Lynch, D-Mass., last spring introduced a stand-alone bill that would mandate stricter oversight, including prohibiting pharmaceutical benefit managers from switching drugs without a physician's approval, requiring PBMs to return to the federal plan most proceeds from rebates and incentives from drug manufacturers, and creating stronger disclosure requirements.

In letters sent to the super committee, several groups of lawmakers recommended adopting the administration's proposal to streamline FEHBP pharmacy contracting practices. Sens. Daniel Akaka, D-Hawaii, Joe Lieberman, I-Conn., and Susan Collins, R-Maine, along with Democrats on the House Oversight and Government Reform Committee, wrote that the plan would result in lower costs both for the government and for program beneficiaries. Federal unions and employee groups also have expressed approval for the proposal because it aims to save enrollees money.

But some observers said that asking the government to take over prescription drug bargaining on the theory that OPM can negotiate a better deal than private sector plans is a threat to the entire program.

Walton Francis, author of Consumers' Checkbook Guide to Health Plans for Federal Employees, said OPM in effect would be negotiating and managing two health programs -- one for physician and hospital care and another for pharmacy benefits. But whether the government should decide which prescription drugs are available to beneficiaries is up for debate, he said.

"An alternative that would save money would be to have a very restricted formulary where they won't pay at all for name brand drugs," Francis said. "The question is whether employees and retirees want to be in the system. Plans are reluctant to limit employee choices."

According to Robert Moffit, senior fellow at the right-leaning Heritage Foundation's Center for Policy Innovation, the issue is not about saving money. Saving $1.6 billion over 10 years is a drop in the bucket compared to FEHBP's annual cost of $40 billion, and the proposal ultimately would reduce competition and lead to less choice for beneficiaries, he said.

"When crunch time comes to secure bigger savings, OPM will, like the [Veterans Affairs Department], resort to a tougher drug formulary, which will reduce workers and retirees' access to a broader range of prescription drugs and therapies," he wrote in a blog post. "Today, if you are in the FEHBP and you don't like a health plan's drug coverage, you dump that plan and get a better one."

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