NTEU Calls for Statutory Pricing for FEHBP As a Way to Significantly Lower Drug Costs

09/29/2009

 9/29/09: The nation’s largest independent union of federal employees today called for legislation that would permit the Federal Employees Health Benefits Program (FEHBP) to lower significantly the cost of prescriptions drugs for its more than eight million enrollees. FEHBP is the largest employer-sponsored health program in the country.

NTEU said the best option is to allow the FEHBP to use the Federal Supply Schedule to purchase drugs—the so-called ‘statutory pricing’ which is permitted by law for the Veterans Administration, Defense Department, Coast Guard and Public Health Service—which could reduce FEHBP prescription drug costs by as much as 50 percent off the average wholesale price.

“This would be a major step forward in helping make FEHBP coverage more affordable for federal employees, retirees and their families, and help make the federal government the employer of choice for the kinds of high-quality workers agencies need now and will need in greater numbers in the future,” said NTEU National President Colleen Kelley. It would also get around the problem of relying solely on Pharmacy Benefit Managers (PBMs) who are clearly not getting the best deal since FEHBP’s drugs cost more than in any other government program.

NTEU made the argument for its position at a Washington forum on improving FEHBP’s drug benefit organized by Rep. Stephen Lynch (D-Mass.,) chairman of the House Oversight and Government Reform Subcommittee on the Federal Workforce.

“I am grateful for Rep. Lynch’s continuing attention to this vital matter, as well as to other issues impacting the federal workforce,” Kelley said. “He has proven time and again he understands well the issues in the federal workplace and has made clear his determination to address them in positive ways.”

The forum, which included representatives of pharmacy benefit manager organizations, insurance carriers, drug manufacturers, non-profit organizations and federal unions, was a follow-up to a June subcommittee hearing examining the value of the FEHBP drug benefit for its enrollees.

Rep. Lynch said testimony at the hearing made clear that FEHBP is “paying far more for their prescription drugs than any other federal programs, and potentially more than most non-federal programs.”

Along with potential options for changes in the FEHBP drug benefit, forum participants addressed a number of related issues, including whether there is sufficient transparency in drug purchasing for the government to determine if it is getting the best price; ways in which FEHBP can leverage its substantial enrollee base to help ensure that competitive factors reduce its prescription costs; and steps that can be taken to strengthen oversight of the FEHBP, and particularly its prescription drug benefit, by the Office of Personnel Management (OPM).

While private insurance carriers provide the coverage, OPM contracts with them and oversees the FEHBP. The insurance carriers use PBMs to negotiate prescription drug prices and benefits. Every year OPM conducts an open season during which program participants can change to the plan of another private carrier if they wish.

President Kelley has long argued that OPM has not done enough to use the marketing clout created by FEHBP’s status as the largest employer-sponsored plan to rein in costs. “A health insurance program means little to the people it is supposed to cover if it is unaffordable,” she said. “Maybe it’s time to take a look at prescription drug purchasing and cut out the middleman, if necessary.”