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Washington, D.C.—Legislation introduced in the House of Representatives today is a huge first step toward helping hold in check prescription drug prices for those enrolled in the Federal Employees Health Benefits Plan (FEHBP), said the head of the National Treasury Employees Union (NTEU). As the largest employer-sponsored health insurance plan in the nation, FEHBP covers more than eight million federal employees, retirees and their families.

The measure, H.R. 4489, introduced by Rep. Stephen Lynch (D-Mass.) addresses a number of issues surrounding the operations of pharmacy benefit managers (PBMs) and transparency in drug pricing in FEHBP. Rep. Lynch is chairman of the House Oversight and Government Reform Subcommittee on the Federal Workforce.

Last fall, NTEU participated in a forum on FEHBP drug benefits conducted by Rep. Lynch, at which some of those issues were identified, including the fact that FEHBP pays from 15 to 45 percent more for prescription drugs than any other government program.

“The Lynch bill would crack down on the drug pricing practices of PBMs,” said NTEU President Colleen M. Kelley, “and would add much-needed transparency to drug pricing and require additional information disclosure to the Office of Personnel Management (OPM), which oversees FEHBP.”

NTEU has, for some time, called for a serious look at drug pricing. “This bill is a solid first step,” Kelley said. “Getting a better handle on the underlying costs associated with purchasing drugs and making pricing more transparent will lead to a better use of taxpayers’ money.”

Virtually every year over the past decade, FEHBP enrollees have faced substantial increases in their health insurance premiums, including an average 8.8 percent hike for this year; what’s more, the 2010 increase in the most popular program, the Blue Cross/Blue Shield standard plan, is 15 percent for self-only coverage and 12 percent for family coverage.

And every year, OPM points to higher drug prices and health care costs as a major contributing factor in rising premiums; overall, prescription drug costs are estimated to account for about 30 percent of FEHBP premiums.

At the same time, President Kelley has urged OPM to take full advantage of the FEHBP’s marketing clout to negotiate better prices for federal workers and retirees. “It seems self-evident that a program the size of the FEHBP could and should use its marketplace impact better,” she said.

Under the present system of federal health insurance, PBMs negotiate drug prices with manufacturers, which provide the PBMs with rebates and discounts. In turn, the PBMs offer prescription medicines to FEHBP insurance carriers which contract with OPM at what are supposed to be discount rates. Yet Kelley said information concerning the amounts of discounts and rebates are kept secret by the PBMs and not used to keep FEHBP costs down.

Among other steps, the Lynch proposal would address potential conflicts of interest by prohibiting manufacturers and retail pharmacies from having a controlling interest in a PBM; prohibit ‘drug switching’ unless the switch is approved by the prescriber of the medicine—and results in a net savings to the carrier, the government and the patient; require PBMs to return 99 percent of all rebates and other manufacturer payments to the insurance carrier, and reimburse pharmacies the same amount it charges the carriers; and disclose to OPM how it determines its prices, how it reimburses pharmacies and how all administrative fees are determined.

“NTEU looks forward to working with Rep. Lynch and the subcommittee on this issue, which clearly is vitally important not only to federal employees and retirees, but to federal agencies as well.

The Lynch bill is designed to open up the process. Employees, both current and prospective, need and want affordable health insurance, and it can make the difference in the decision of where to work,” President Kelley said.

NTEU is the largest independent federal union, representing 150,000 employees in 31 agencies and departments.