Federal employee health plans were supposed to receive the savings their pharmacy benefit managers negotiated. Four federal audits found more than $580 million in overcharges despite contracts requiring those savings to be passed through.
APCI’s latest Insights white paper, by Greg Reybold and Cathy Hanna, examines the findings and the payment practices behind them. The audits by the Office of Personnel Management’s Office of Inspector General covered plans administered by Express Scripts and CVS Caremark.
The findings include pharmacy discounts, transaction-fee credits, manufacturer payments, and an improper performance incentive. The total excludes lost investment income. Some manufacturer rebates were credited after audit review, so the full amount should not be treated as an outstanding balance.
APCI identifies a recurring problem: PBMs negotiate discounts and collect payments across multiple clients, then account for those financial benefits separately from individual prescription claims. Individual prescription claims may therefore fail to capture the full financial benefit attributable to a plan.
In the largest example, auditors identified $400.7 million in retail pharmacy discounts that Caremark had not passed through to the Blue Cross Blue Shield Service Benefit Plan. Caremark disputed the finding, arguing in part that auditors had applied later contract requirements retroactively. Read the audit and Caremark’s response.
For independent pharmacies and patients, the stakes extend beyond accounting. PBMs can determine what competing pharmacies are paid while steering patients toward pharmacies they own, raising questions about fair reimbursement, competition and patient choice.
APCI calls for Congress to enact H.R. 6610, the Pharmacists Fight Back Act legislation for federal employee health benefit plans. The proposal would tie pharmacy reimbursement to acquisition costs, prohibit certain fees and payment reductions, and ban patient steering. It would also apply manufacturer rebates to reduce patient cost sharing and remit the remainder to the health plan. Read the bill.
APCI’s position is straightforward: Federal drug benefits need enforceable payment rules that protect taxpayers, fairly reimburse pharmacies, and preserve patients’ pharmacy choice.