By Jim Martin and David Williams
The Hill June 24, 2013
Health care costs are on the rise and this increase will affect employers, employees and taxpayers through Medicare Part D, the Federal Employees Health Benefits Program, and TRICARE (the Department of Defense). A key part of the health care delivery system in the United States is the use of prescription drugs. According to a 2010 heath care tracking survey, two-thirds of all Americans—and nearly 90 percent of seniors—reported taking at least one prescription drug in the past year. These prescription drug benefits are often built into the underlying health insurance plans.
Prescription drug benefits only amount to ten percent of all heath care spending in the U.S., but this spending can still have a large impact on the cost of health care. Any program of such a large scale can benefit from continued evaluation and cost-control measures.
Mail order is a growing mode of delivering prescriptions. Mail order prescription drugs seems logical but there are many pitfalls with this mode of delivery, including cost, potential waste, and customer satisfaction. With mail order growing in size (TRICARE mail order drug expenditures doubled from 2005 to 2010), there is a growing concern that taxpayers might not be getting the best deal possible.
At the heart of most health care programs is a Pharmacy Benefits Manager, who acts as third party administrator of prescription drug programs. Even though they are mostly responsible for the processing and payment of prescription drug claims, PBMs are also responsible for developing and maintaining the formulary, contracting with pharmacies, and negotiating discounts and rebates with drug manufacturers.
The PBM’s role has been evolving over the years. With the purchase of prescription mail order delivery businesses, these once neutral administrators now provide incentives to use mail order over pharmacies. The problem is that these incentives come at the expense of taxpayers and customer service.
Mail order creates massive inefficiencies (and waste) because most of the prescriptions are put on a 90-day auto-refill program. This is a problem because prescriptions change and people die. There are numerous reports of people not being able to halt their medication and the medication keeps piling up.
Every year the Michigan Pharmacists Association holds a medical disposal event in Lansing and at the September 2012 event, they reported that, “548 lbs of non-controlled substances and 31 lbs of controlled substances” had been given to be safely disposed. In all, 579 lbs of medications that were valued at nearly $1,000,000 in wasted pharmaceuticals were collected in just a single day in just one state capital.
Internal government watchdogs are even starting to question the use of mail order and the problems with PBMs. Patrick McFarland, inspector general at the Office of Personnel Management, testified that “There’s a good chance we’re not getting a good deal…We can’t find out information such as the incentive pay, rebate pay, volume discount pay, administrative fees [of PBMs]. We can’t find that information out, because we can’t audit that; it’s not available to us now.”
In addition to House and Senate letters urging an audit of the mail-order pharmacy program that is offered through TRICARE, during a 2009 committee hearing, Rep. Stephen Lynch (D-Mass.) said this about PBMs: “It’s unbelievable, the needless complexity of this whole system…it’s built to thwart oversight. It’s built to introduce as much complexity as possible. It’s a scam of major proportions.”
States have begun to clarify auditing standards as well as transparency in pricing data on their own over recent years, and we applaud them for exercising valuable oversight for their taxpayers.
The system needs to ensure PBMs and their mail order operations are accountable to the government and the taxpayer. TPA supports further oversight by the government – TRICARE, FEHBP, CMS, and Congress—to ensure that taxpayer dollars are not being wasted on mail order pharmaceuticals.
Potential dollar savings are real. According to GovExec, “FEHBP, with hundreds of different plans available to federal employees and their families, doesn’t do enough to rein in costs, especially when it comes to prescription drugs. According to Lynch’s office, the government spends $35 billion per year on FEHBP benefits, with about $10 billion going to prescription drugs.
Ordering pharmaceuticals through the mail is not like ordering any other product. There are time sensitivities and the ever-changing tweaks to a prescription that make mail order a less practical way of delivering drugs. Sending millions of dollars of prescriptions through the mail puts patients and taxpayers at risk. Taxpayers and patients deserve answers about mail order pharmaceuticals and better ways to deliver medication to patients.
Martin is chairman of the 60 Plus Association. Williams is president of Taxpayers Protection Alliance, a group advocating government fiscal responsibility and transparency.