Lynch Introduces FEHBP Prescription Drug Integrity, Transparency, and Cost Savings Act

Press Release

Congressman Stephen F. Lynch, Ranking Member of the Subcommittee on Federal Workforce, U.S. Postal Service and the Census, recently introduced H.R. 1367, the FEHBP Prescription Drug Integrity, Transparency, and Cost Savings Act. The bill would significantly strengthen 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. 1367 would also better ensure that program enrollees and the American taxpayer are getting the best prescription drug benefit for their dollar.

As the largest employer-sponsored health insurance program in the country, the FEHBP covers approximately 8.2 million federal workers, annuitants, and dependents. According to the Office of Personnel Management, the FEHPB provides an estimated $45 billion in health care benefits per year and spends over $10 billion of that amount 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. Moreover, in contrast to other federal programs, the FEHBP does not regulate or negotiate drug pricing for its enrollees but rather relies on competition among its various carriers and so-called Pharmacy Benefit Managers to negotiate prescription drug benefits and maintain affordable prices. Regrettably, however, 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. In addition, the FEHBP is even experiencing higher prescription drug costs than some non-federal and private sector programs.

"If we're looking for 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 Stephen F. Lynch. "Through enhanced oversight provisions that allow for alternative contracting and pricing mechanisms and mandate increased transparency, my legislation will serve to maximize cost savings and enhance the program's ability to offer high-quality and low-cost prescription drugs."

In particular, the FEHBP Prescription Drug Integrity, Transparency, and Cost Savings Act provides the Office of Personnel Management (OPM) greater 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 Pharmacy Benefit Managers (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 (AMP).

H.R. 1367, the FEHBP Prescription Drug Integrity, Transparency, and Cost Savings Act, has received the support of several key FEHBP stakeholders, including the American Federation of Government Employees and the National Treasury Employees Union.

J. David Cox, President of the American Federation of Government Employees, AFL-CIO, said, "AFGE is proud to endorse H.R. 1367, legislation introduced by Congressman Lynch to rein in the escalation of FEHBP prescription drug costs. The increase in prescription drug costs has been a major factor in the sharp increases in FEHBP health insurance premiums paid by federal employees and their families. AFGE has been urging OPM to crack down on abusive pharmaceutical and insurance company practices for years, and Congressman Lynch has demonstrated his capacity for leadership in this critical area by introducing this legislation. Federal employees pay at least 25% and as much as 55% of their FEHBP premiums, and they have needed an aggressive advocate for cost controls in this critical program. They've got one in Congressman Lynch."

"The National Treasury Employees Union (NTEU) has long advocated for needed improvements in FEHBP's prescription drug contracting and pricing practices, including providing OPM with greater oversight authority," said NTEU National President Colleen M. Kelley. "This legislation would be a major step forward in bringing down health care costs for federal workers and retirees. We applaud the continuing work of Rep. Lynch on this important matter. We welcome this bill and strongly support it."

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