New bill may sever PBM-retail pharmacy ties

WHAT IT MEANS AND WHY IT’S IMPORTANT A bill that would prohibit federal PBM contracts with companies that operate both a PBM and retail pharmacies not only has sparked debate but, if passed, could be a blow to the vertically integrated pharmacy-PBM model.

(THE NEWS: Bill would prohibit federal PBM contracts with companies operating PBMs, retail pharmacies. For the full story, click here)

As CVS Caremark has demonstrated with its game-changing merger in 2007, the pharmacy-PBM model has shown to equate to better control over health care costs for employers and plan providers, as well as improved clinical outcomes for patients, through integrated end-to-end services.

But some critics are calling for PBM reform within the FEHBP, claiming that PBMs have unclear pricing methods, retain most discounts or rebates prescription drug manufacturers give them, and receive little oversight from the Office of Personnel Management. A bill introduced in the House in January, the FEHBP Prescription Drug Integrity, Transparency and Cost Savings Act, now has been sent to the Committee on Oversight and Government Reform for consideration.

But many, including the OPM, the Pharmaceutical Care Management Association and CVS Caremark itself, have spoken out in opposition to the bill, the OPM stating that it would impose “significant administrative costs” that could be passed on to federal employees. CVS Caremark’s current FEHBP contract expires in 2011.

As reported in February on Federal Times’ Web site, which is a news and information service for Federal Managers, John O'Brien, OPM's director of planning and policy analysis, told lawmakers that OPM wants to write its own methods of oversight, contracting models and pricing into the contracts it strikes with PBMs.

"Requiring the use of specific contracting models and pricing methods via legislation will not allow the program flexibility in an industry where business practices are rapidly evolving," O'Brien was quoted as saying.

In addition, in a recent Roll Call column Walton Francis, the author of “Putting Medicare Consumers in Charge: Lessons from the FEHBP,” published by the American Enterprise Institute, called the bill “antithetical to the program design of the FEHBP and of the Medicare Part D and Medicare Advantage programs modeled after the FEHBP.”

Francis added that it is not the case that, “This bill ‘simply imposes reasonable disclosure requirements so the [FEHBP] can better monitor and reduce its prescription drug spending.’ The bill would debar CVS Caremark and other firms that combine PBM and pharmacy functions from contracting with any FEHBP plan and would prohibit health-based drug substitution recommendations that did not lower costs. It would also require payment at whatever prices manufacturers charged, would impede the collection and dissemination of information on drug utilization to the Food and Drug Administration and the National Institutes of Health, would have OPM set dispensing fees for FEHBP sales in every pharmacy in America, and would impose an immense array of paperwork burdens on manufacturers, PBMs, and pharmacies.”



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