3/10/11: NTEU National President Colleen Kelley today offered strong support for legislation to help address rising prescription drug prices for federal employees by increasing oversight of the operations of pharmacy benefit managers (PBMs). Essentially, PBMs negotiate prices with drug manufacturers.

The measure, offered by Rep. Stephen Lynch (D-Mass.), also would increase transparency in drug pricing for the Federal Employees Health Benefits Program (FEHBP), which is the largest employer-sponsored health care plan in the nation, with more than eight million enrollees.

The Lynch bill, H.R. 979, is similar to one he introduced in the last Congress.

“Rising prescription drug prices are a major factor pushing health care costs higher for federal employees, retirees and their families,” said President Kelley. “Approval of this legislation would be an excellent step forward in addressing this serious issue.” During NTEU’s legislative conference NTEU members spoke with their congressional representatives about how prescription drug reform can reduce FEHBP costs.

In recent testimony about federal compensation matters before the House Oversight and Government Reform Subcommittee on the Federal Workforce, President Kelley noted the administration’s proposed fiscal 2012 budget contains changes to streamline FEHBP’s pharmacy benefit contracting that would save $69 million in 2012 and more than $1.76 billion over 10 years. “I urge the subcommittee to look further into this issue,” the NTEU leader said.

Prescription drug costs account for about 30 percent of FEHPB premiums, and the federal program, which is administered by the Office of Personnel Management (OPM), pays between 15 and 45 percent more for such drugs than any other government program.

PBMs originally were intended to handle the administrative functions associated with drug claims, but their function has expanded to negotiating for discounted drug rates. The PBMs usually retain most of the discounts and rebates from pharmaceutical manufacturers, however, resulting in these discounts and rebates not being reflected in the final prices paid by FEHBP enrollees.

NTEU has long argued that OPM needs to take stronger actions to address drug pricing issues, and in particular the disparity between drug costs under the FEHPB and those under other federal programs. OPM’s costs are higher than in any other federal program including the Veterans Administration, Department of Defense, Medicare and Medicaid. The Veterans Administration, for example, has the right—which the FEHBP does not—to purchase prescription drugs at lower cost under the Federal Supply Schedule.