Cost Control

Controlling escalating prescription drug costs may be a key step in lowering the overall cost of care under the Federal Employees Health Benefits Program. But disagreement swirls around the best way to curb prices.

According to J. David Cox, national secretary-treasurer for the American Federation of Government Employees, there may be a simple solution -- requiring FEHBP carriers to purchase drugs for their enrollees at the discount mandated by the Federal Supply Schedule.
Under the FSS, the Veterans Affairs Department negotiates discounts on prescription drugs for more than 5 million veterans. But under FEHBP, carriers are responsible for negotiating prices, leading to results that tend to benefit the carrier rather than the enrollees, Cox said.
In 2000, OPM proposed that the Special Agents Mutual Benefit Association, an employee plan under FEHBP, be permitted to purchase drugs off the FSS as part of a two-year demonstration. But drug companies stalled the program, arguing that only government agencies were eligible for the supply schedule discount.

AFGE has worked with Congress over the last few years to draft legislation that would require FEHBP carriers to purchase drugs off the schedule. But the legislation has shown little progress, Cox said. "Obviously who runs the country from time to time slows our progress down," Cox said. "But there is a new Congress in town, and they're interested in things that could be savings for the employees enrolled in this plan."

Nancy Kichak, associate director for strategic human resources policy at OPM, said the agency opposes such a bill. "We want our carriers to have the flexibility to offer a variety of products to encourage competition," she said, adding that OPM would prefer making the supply schedule discounts optional for FEHBP carriers.

Kichak added that while use of the FSS would lower drug costs, it could do away with valuable elements of some plans, such as encouraging the use of generic drugs and allowing employees to obtain prescriptions through mail order. Use of the supply schedule "would only help in one element of the drug purchase, which is cost, and only for those drugs on the schedule," she said.

And there are alternative ways to curb drug costs. Sen. David Vitter, R-La., has proposed legislation that would legalize importation of certain prescription drugs, whether through mail order or the Internet, so long as the foreign drug companies are registered with the Health and Human Services Department.

Vitter's bill (S. 251) has been introduced in the last few sessions of Congress but has not made it out of committee. In 2003, the Congressional Budget Office estimated that similar importation legislation would reduce federal direct spending for Medicaid, FEHBP annuitants, TriCare for Life and Medicare Part B by $2.9 billion between 2004 and 2013. Prescription drug spending for active workers in the federal employee program and programs for military personnel and veterans would have been reduced by $400 million over that same time period, CBO estimated.

Kichak expressed optimism that drug costs will become less of a threat in the future. OPM has found that simply working with carriers to generate new ideas for controlling drug costs has helped significantly, she said. Some of those ideas include encouraging enrollees to purchase generic drugs or purchase smaller doses of a drug until the enrollee can ensure that the prescription is effective, she said.

"We believe that we need to remain partners with our carriers because they have good ideas for controlling drug costs," Kichak said. "We believe in carriers to meet the needs for health care."

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