2/23/10: NTEU National President Colleen Kelley testified before a key House subcommittee today in favor of legislation that would take steps to address rising health insurance costs under the Federal Employee Health Benefits Program (FEHBP). You can review her testimony here.

President Kelley told the House Oversight and Government Reform Subcommittee on the Federal Workforce that H.R. 4489, if approved, would improve the pricing and contracting for prescription drugs in order to achieve better savings for taxpayers and federal enrollees. The subcommittee is chaired by Rep. Stephen F. Lynch (D-Mass.).

“H.R. 4489 takes a giant step forward in addressing the problems of why the Office of Personnel Management (OPM) has been unable, thus far, to better leverage what should be a significant advantage,” said President Kelley. “With better transparency, accountability, standards and increased OPM oversight, this bill is on track to reduce cost and deliver a better deal for federal employees and retirees.” Prescription drug costs account for about 30 percent of FEHBP premiums and FEHBP pays anywhere from 15 to 45 percent more for prescription drugs than any other government program.

President Kelley also testified in support of the bill’s attempts to increase OPM’s oversight of Pharmacy Benefit Managers (PBMs) within the FEHBP. PBMs were originally intended to handle administrative functions associated with drug claims, but they now negotiate for discounted drug rates and retain most of the discounts and rebates from pharmaceutical manufacturers. Somewhere along the way, these discounts and rebates have not always been reflected in the final prices paid by FEHBP enrollees.

President Kelley said the legislation would crack down on the drug pricing practices of PBMs and increase important information disclosure on a key aspect of federal employee health insurance costs.

“This bill would allow OPM to access information on arrangements the PBMs have with manufacturers and pharmacies,” she said. “If PBMs want to participate in the FEHBP, they should be held accountable.”

Along with the significantly increased transparency and accountability, H.R. 4489 also would prohibit manufacturers and retail pharmacies from having a controlling interest in a PBM; require PBMs to return 99 percent of all rebates and other manufacturer payments to the insurance carrier; reimburse pharmacies the same amount charged to carriers; and prohibit ‘drug switching’ unless the switch is authorized by the prescriber of the medicine.

Additionally, NTEU believes that H.R. 4489 could be enhanced even further with language authorizing a pilot program testing statutory drug pricing, specifically allowing OPM to buy prescription drugs directly off of the Federal Supply Schedule. “The Veterans Administration and the Department of Defense already do this and their drug prices are substantially lower than FEHBP’s,” said President Kelley. “This approach shows cost-savings promise.”

For years, NTEU has been a leader in urging Congress to take a serious look at FEHBP drug prices. Last year, the Union participated in a forum held by Rep. Lynch on FEHBP drug benefits, which showed the significant disparity between drug costs under the FEHBP and their costs under other programs.