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Government News
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Feb. 8, 2010
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1. A bill to strengthen federal oversight of prescription drug benefits for the Federal Employees Health Benefits Program (FEHBP) would impose strict new regulations on PBMs and health plans, such as mandating disclosure of sensitive pricing information and requiring physician permission for drug switching. While critics say the bill has little chance of passing, continued efforts by Congress — and growing interest in many states — has increased the likelihood that PBM transparency requirements in contracting will soon become a reality, one expert warns.
Last month, Rep. Stephen Lynch (D-Mass.), chairman of the House Subcommittee on Federal Workforce, Postal Service and the District of Columbia, introduced H.R. 4489, the FEHBP Prescription Drug Integrity, Transparency, and Cost Savings Act. As part of the bill, Lynch proposes intensifying oversight of PBMs that contract with FEHBP by mandating that they pass through 99% of all rebates, market-share incentives and other payments received from drug manufacturers. In addition, the legislation would prohibit drug switching without prior physician approval, enforce new transparency requirements and cap prescription drug prices paid by FEHBP at the average manufacturer price. The bill also would create more burdensome disclosure requirements for PBMs and prohibit a retail pharmacy or drug company from owning a controlling interest in a PBM.
Criticism of federal employees’ drug benefits has been mounting over the last year, with some lawmakers scrutinizing the program for paying more for drugs than other government agencies do. During a subcommittee hearing last summer, Lynch called PBM contracts a bad deal for FEHBP. But his earlier proposals went far beyond what’s included in the current bill, such as suggesting that PBMs become direct federal contractors with the Office of Personnel Management (OPM) and that FEHBP offer fewer benefit plan options in order to gain greater control. Meanwhile, several states have recently introduced and even passed legislation requiring more PBM transparency.
The greatest hurdle for CVS Caremark Corp., which manages 80% of drug benefits for FEHBP, would be a provision that prevents retail pharmacies from owning PBMs. According to James Shurtleff, associate analyst at Stifel, Nicolaus & Co., Inc., the proposal “seems illogical given CVS’s history with the federal employees’ program that dates back to 1993.” The FEHBP contract represents $4 billion in revenue for the company.
Aspects of the bill also would create operational issues for Medco Health Solutions, Inc., which provides mail-order services for more than 4.5 million FEHBP enrollees. For example, when and if a PBM wants to make a suggestion for a patient to use a particular drug, it must disclose the reason why it is suggesting the substitution, as well as the financial impact of the substitution on the PBM, the carrier and the patient, according to the bill.
Such issues “compromise the positive intent of this legislation,” Medco spokesperson Jennifer Luddy tells AIS. However, Medco doesn’t seem to be too concerned over the proposed new changes, which she says essentially call for a cost-plus delivery model. “And we could work within that context,” Luddy says. “This means we would price the value-added services separately from the core administrative offerings.”
According to Shurtleff, “Medco could manage a change in the contract structure to transparent pricing and administrative fees without significant downside from the existing structure.” This is because the federal employees’ contract “operates at a significantly lower margin than Medco’s average mail-order business, given the sheer size and negotiating leverage of the federal government,” he explains.
While the bill could mean a more serious consideration of transparency initiatives by the federal government, Shurtleff contends that “the PBMs acknowledge that transparency in contracting has increased and will continue to do so.” Thus, PBMs have already “developed business models capable of adapting to transparent or spread contracts.” However, he adds that the bill’s limitation of drug substitution could increase pharmacy costs, which seems contradictory to its intent, he says.
The bill received immediate criticism from the Pharmaceutical Care Management Association (PCMA), which contends that it’s the “wrong time for Congress to experiment” on FEHBP. The program “is one of the best-functioning, well-regarded health programs in America and should not be subject to wholesale political changes,” PCMA says in a statement. Touting the success of the program, PCMA points to a recent OPM survey, which found that the majority of federal employees are actually satisfied with their health benefits.
The organization contends that if passed, the legislation would significantly limit prescription drug choices for federal employees. The bill’s mandate to force disclosure of pricing information would give “the upper hand to drug makers and drug stores to charge higher prices at the expense of federal employees,” PCMA says.
The organization shouldn’t be too concerned, according to Shurtleff, who thinks the bill has a low chance of passing. “The PBM industry has effectively advocated its interests in Congress, as evidenced by the industry’s lack of exposure to health reform taxes and other negative policy changes,” he says. In addition, he expects the bill shouldn’t put pressure on PBM shares in the near future. “I think that most investors recognize that proposed transparency bills are commonplace at this point in time, so the share impact should be limited unless the bill’s chances of becoming law increase.”
2. House Speaker Nancy Pelosi (D-Calif.) said she plans to bring to a vote soon a stand-alone bill aimed at ending the health insurance industry’s half-century-old exemption from antitrust laws, according to various news sources. On a Feb. 2 conference call with progressive bloggers, Pelosi said the House will pass legislation which will enable the federal government to investigate possible collusion among health insurers, the Huffington Post reported. The stand-alone bill Pelosi is bringing to the floor was originally passed by the Judiciary Committee in October, but was later added to the health reform bill the House passed on Nov. 7. The Senate bill did not include the antitrust provision.
Reprinted from the Feb. 8, 2010, issue of HEALTH PLAN WEEK
3. A Boulder County, Colo., jury ruled that a subsidiary of Assurant Health must pay $37.3 million to a woman whose policy was canceled after a serious car accident, according to the plaintiff’s attorney Marc Levy. Levy said that the jury heard testimony that Time Insurance Co. rescinded Jennifer Latham’s policy without conducting a reasonable investigation and without notifying or asking her for input. The insurer contended that Latham did not disclose previous medical treatments on her application, including treatment for uterine prolapse and a visit to the emergency room for shortness of breath, The Denver Post reported. According to the newspaper, in addition to canceling her policy, Time also refused to cover roughly $185,000 in medical bills from the accident. Peter Duckler, a spokesperson for Assurant, told AIS, “While we cannot discuss the specifics of this case, we disagree strongly with the verdict and will vigorously pursue post-trial motions and appeals.”
Reprinted from the Feb. 8, 2010, issue of HEALTH PLAN WEEK
4. Given the uncertain future of a final health reform bill, the spotlight has returned to state efforts, many of which were underway before President Obama took office, and long before Senate Democrats lost their filibuster-proof majority. But industry observers contacted by AIS say most states are so strapped for cash that any efforts to expand insurance coverage — or enact other changes — will be difficult. Financial problems in Nevada, for example, have prompted lawmakers there to consider scrapping their Medicaid program.
As health reform was debated in Washington, D.C., actions at the state level slowed, with lawmakers taking a wait-and-see approach. But over the past couple of weeks, there has been an uptick in announcements related to health reform initiatives among states, says Kathleen Nolan, director of the health division of the National Governors Association’s Center for Best Practices. State officials are looking more closely at strategies such as care coordination and medical homes that can help reduce medical costs and improve quality, she says. And while expanding coverage to the uninsured is a critical issue for many states, there are no new vehicles to address it, she tells AIS. Existing vehicles include Medicaid, State Children’s Health Insurance Programs (SCHIP) and initiatives that target small businesses. “While the tools are there, the funding is not…and that is the challenge,” she tells AIS.
Alan Weil, executive director at the National Academy for State Health Policy, agrees and says that although interest in reforming the health care system is at an all-time high in many states, the resources needed to implement changes are at an all-time low. When it comes to coverage expansion, for example, “it’s difficult to have more than just good intentions,” he says.
“With their severe budget problems, states are not in a position to undertake major health reforms that would require funding, such as expanding Medicaid or other public programs,” adds Martha King, health program group director at the National Conference of State Legislatures. Although states will find it difficult to reduce their uninsured populations through existing programs such as Medicaid, Weil notes that many states have successfully trimmed the number of uninsured children as a result of last year’s reauthorization and expansion of SCHIP.
While major reform efforts are unlikely, some states are likely to be successful at making tweaks, such as increasing age limits for dependent coverage. “To legislators, there is little or no cost associated with that,” says Tory Bunce, research and policy director at the industry-backed Council for Affordable Health Insurance (CAHI). She also predicts that more states will try to require health plans to include an autism benefit. A House subcommittee in Virginia this month failed to send an autism mandate bill to a full committee vote.
A bipartisan bill approved in the Virginia state Senate Feb. 1 would prevent any federal health reform law from mandating health insurance coverage for individuals. Lawmakers in more than 30 other states are pursuing similar bills. But industry observers tell AIS that any individual mandate at the federal level would trump such a state law. The impetus for such bills is concern about the direction federal health reform efforts could take, says J.P. Wieske, CAHI’s director of state affairs. “It’s more of a warning [to federal lawmakers] that they need to design any mandates thoughtfully,” he tells AIS.
Although the term “mandate” is used in health reform bills, people who opt not to enroll in health coverage would face a financial penalty that is assessed on individual federal income taxes. “States don’t really have a role in tax payment,” Weil says, adding that such bills are largely symbolic and are likely more of a political statement.
Reprinted from the Feb. 8, 2010, issue of HEALTH PLAN WEEK
5. The HHS budget submitted as part of President Obama’s Fiscal Year 2011 spending plan includes significant investments to escalate the assault on fraud and abuse, with a $1.7 billion total for HHS fraud-fighting efforts that includes a $60.2 million increase for HHS-DOJ strike force initiatives.
“The budget includes $561 million in discretionary resources, an increase of $250 million, to strengthen Medicare and Medicaid program integrity activities, with particular emphasis on fighting health care fraud in the field, increasing Medicaid audits, and strengthening program oversight while reducing costs,” HHS says.
Discretionary spending comes from annual appropriations bills and is added to the mandatory fraud-and-abuse and program integrity spending (e.g., for employees), which is permanent and doesn’t require yearly action to ensure its allocation in major programs like Social Security and Medicare.
The jump in discretionary funds is for the Health Care Fraud and Abuse Control program, part of multi-year fraud-fighting efforts that have been included in the budget for the past two years, budget documents explain. HCFAC priorities include “identifying and recouping excessive payments, pinpointing potential weaknesses in program integrity oversight, and establishing new processes and safeguards to correct programmatic vulnerabilities,” the budget says.
HHS says the budget also includes new proposals to save $14.7 billion over 10 years, including:
- Establishing a collaboration between CMS and the IRS to identify fraudulent providers via a data match,
- Consolidating medical review activities under fewer Medicare Administrative Contractors,
- Consolidating provider enrollment activities under MACs, and
- Expanding Medicare revocations for abuses of billing privileges.
Read more about the HHS budget at http://www.hhs.gov/asrt/ob/docbudget/
2011budgetinbrief.pdf.
Reprinted from the Feb. 8, 2010, issue of REPORT ON MEDICARE COMPLIANCE
6. New York Gov. David Paterson (D) introduced a bill that would set up a code of conduct for interactions between health care professionals and pharmaceutical, biologic and medical device makers as part of the state’s 2010-2011 budget. If enacted, the legislation would limit financial support (including consulting contracts, speaking contracts and gifts) to health care professionals from the companies; promotional materials given to physicians; meals provided to physicians and their staffs; recreational items like tickets to theater and sporting events; and continuing medical education programs hosted by the companies. New York state will begin assessing civil penalties if the bill is passed, with companies subject to a $15,000 fine per violation and health care professionals facing $5,000 per violation. Other states with laws that make relationships between companies and physicians more transparent include Minnesota, Vermont, Maine, West Virginia and the District of Columbia.
Reprinted from the Feb. 8, 2010, issue of REPORT ON MEDICARE COMPLIANCE
7. Sen. Chuck Grassley (R-Iowa) introduced a bill Jan. 28 that will attempt to deter fraud, waste and abuse in Medicare and other federal health care programs. The Strengthening Program Integrity and Accountability in Health Care Act (S 2774) also would (1) enhance screening methods to help keep fraudulent providers out, (2) give the government more time to evaluate the legitimacy of Medicare providers before payment is required, (3) strengthen the feds’ ability to detect fraud with better disclosure requirements, (4) enhance coordination of federal agencies, and (5) improve enforcement capabilities by expanding the range of activity subject to penalties and toughening existing penalties.
Reprinted from the Feb. 8, 2010, issue of REPORT ON MEDICARE COMPLIANCE
9. A licensed practical nurse at Our Lady of Perpetual Help in Virginia Beach, Va., was sentenced to two years in prison for aggravated identity theft and stealing the identities of nursing home patients, according to a Jan. 19 press release by the U.S. Attorney’s Office for the Eastern District of Virginia. Erica Fowler pleaded guilty on Oct. 20, 2009, to accessing and stealing identity information for at least nine residents between May and July 2008. She used the information to open credit card accounts and make more than $14,000 in purchases. The lending institutions reimbursed the residents for the purchases. The judge ordered Fowler to pay restitution to the financial institutions. The case was investigated by the U.S. Postal Inspection Service and the Virginia Beach Police Department.
Reprinted from the February 2010 issue of REPORT ON PATIENT PRIVACY
10. A new ethics complaint accuses former Kansas attorney general Phill Kline of widespread abuse of office, according to the Kansas City Star. The 36-page complaint states that Kline dispatched staff members to stake out an abortion clinic and record women’s license plate numbers, obtained state medical files under false pretenses, held onto the files after his tenure in office and lied about his actions under oath. As attorney general, Kline investigated doctors at two abortion clinics, to determine if they had performed abortions on girls under age 16 without filing child-abuse reports. Klein appeared on the O’Reilly Factor in 2006, during which the host read parts of the patients’ (de-identified) medical records on air. Kline faces a hearing in front of a judicial ethics panel on May 26 and could face disbarment. One of the doctors Kline had investigated, George Tiller, M.D., was shot to death in 2009 while serving as an usher at his church. Scott Roeder, an anti-abortion extremist, was convicted of first-degree murder for Tiller’s death on Jan. 29.
Reprinted from the February 2010 issue of REPORT ON PATIENT PRIVACY
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New • 2000-2009 Survey Results: Pharmacy Benefit Trends & Data • The AIS Guide to Medicare Compliance Risks & Strategies Best
Sellers • Report on Patient Privacy and AIS's HIPAA Compliance Center • The AIS Guide to Blue Cross & Blue Shield Plans* • Guide to Managing Never Events and HACs • The Aging of America: Implications for the Business of Health Care *Not affiliated with BlueCross BlueShield Association or its member companies See full
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