Lynch Introduces FEHBP Prescription Drug Oversight & Cost Savings Act

May 18, 2015

BOSTON, MA – Congressman Stephen F. Lynch (D-MA) recently introduced H.R. 2175, the FEHBP Prescription Drug Oversight & Cost Savings Act. The bill would improve federal oversight of the prescription drug benefits available to federal workers, retirees, and their families through the Federal Employees Health Benefits Program (FEHBP). H.R. 2175 would also better ensure that program enrollees and the American taxpayer are receiving the best prescription drug benefit for their dollar. As the largest employer-sponsored health insurance program in the nation, the FEHBP covers approximately 8.2 million federal workers, annuitants, and dependents.

According to the Office of Personnel Management (OPM), the FEHBP provides an estimated $45 billion in health care benefits per year and spends over $10 billion of that total on prescription drug costs alone. Despite the fact that prescription drug costs compromise nearly 30% of FEHBP premiums, the program’s pharmacy benefit and pricing structure has been subject to limited federal oversight. In addition, in contrast to other federal programs, the FEHBP does not regulate or negotiate drug pricing for its enrollees. Instead, it relies on competition among its various carriers and so-called Pharmacy Benefit Managers (PBMs) to negotiate prescription drug benefits and maintain affordable prices. Regrettably, the FEHBP is paying between 15% and 45% more for its prescription drugs than other federal programs, including those at the Veterans Administration, the Department of Defense, Medicare, Medicaid, and the Public Health Service’s 340B Program. The FEHBP is even experiencing higher prescription drug costs than some non-federal and private sector programs.  

“If we’re seeking responsible alternatives to addressing deficit reduction and reining in health care costs, strong oversight of the FEHBP prescription drug benefit would be a commonsense starting point,” said Congressman Lynch. “H.R. 2175 will serve to maximize cost savings and enhance the program’s ability to offer high-quality and low-cost prescription drugs for federal employees by enhancing oversight provisions that allow for alternative contracting and pricing mechanisms and mandating increased transparency. My legislation will lower federal employees’ out-of-pocket spending and the program’s operational costs which benefits both enrollees and taxpayers.”  

In particular, the FEHBP Prescription Drug Oversight & Cost Savings Act provides the OPM increased oversight authority of the FEHBP’s prescription drug contracting and pricing methods in order to better ensure that federal workers are receiving the best benefits at the best price. Among the strong oversight provisions included in the legislation is a requirement that PBMs, who currently contract with individual insurance plans to provide FEHBP prescription drug benefits, return 99% of all rebates, market share incentives, and other monies received from pharmaceutical manufacturers for FEHBP business. In addition, the legislation would prohibit “drug switching” without prior physician approval, impose new disclosure and transparency requirements on PBMs in line with industry trends, and cap prescription drug prices paid by the FEHBP at the amount of the Average Manufacture Price.  

H.R. 2175, the FEHBP Prescription Drug Oversight & Cost Savings Act, has received the support of several key FEHBP stakeholders including the American Federation of Government Employees (AFGE), the National Treasury Employees Union (NTEU), and the Federal Managers Association.

“AFGE thanks Representative Lynch for once again recognizing the importance of federal employees having access to quality health care benefits through FEHBP. The FEHBP Prescription Drug Oversight & Cost Savings Act would protect federal employees from paying more than they should for prescription drugs and provide more oversight of prescription drug benefits,” said AFGE National President J. David Cox. “For the past five years federal employees have endured attacks on their pay and benefits, and on average watched their health care contributions continually increase. We thank the Congressman for introducing legislation that makes FEHBP more efficient and ensures that federal employees and taxpayers get the most return for their dollars.”

“NTEU strongly supports Congressman Lynch’s FEHBP reform bill that would result in lower prescription drug costs – it’s a win-win for taxpayers and federal employees and retirees,” said NTEU National President Colleen Kelley. “A long-time leader in health care access, choice, and quality, it’s time to make FEHBP the model for prescription drug purchasing and disclosure.”

H.R. 2175 is co-sponsored by Committee on Oversight and Government Reform Ranking Member Elijah E. Cummings (D-MD) and Congresswoman Eleanor Holmes Norton (D-DC).