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Executive Summary

Pharmacy services could be undermined by the prescription drug benefit established for government employees and retirees under the Federal Employees Health Benefits Program, Georgia Pharmaceutical Association Exec VP Larry Braden contended at a March 26 seminar sponsored by the Senate Special Committee on Aging. Because the program emphasizes cutting pharmacy reimbursement costs over health care quality, it is "undermining [if not] destroying the infrastructure of the delivery of pharmacy services," Braden said. The plan does not require the provision of pharmacy services such as counseling, medication screening and maintaining patient profiles, he contended, and pharmacy is concerned that it will become a model for other large health care programs, Braden said. "This program is so large, and being a federal program, it's being viewed in the private sector as a model for how large industrial corporations or other," he said. "The concern that we have is...where is this taking us" in public policy. Braden contrasted the government employee plan's emphasis on cost cutting to the Medicaid program's requirements for pharmacy services. The employee program "creates as a matter of federal policy a dichotomy" between two government prescription drug benefits: the Medicaid program and the employee plan, he said. Pharmacists "clearly" perceive "a dichotomy with two very distinct and separate programs." Braden owns three pharmacies in north Atlanta whose price bids, equal to reimbursement paid by Georgia Medicaid, were rejected as too high by the employee plan. "Two of the national chain organizations bid into this program [a dispensing fee of] $1.25," he maintained. In contrast, "the Georgia Medicaid program pays $4.41 and acknowledges that's about 60[cents]-70[cents] below the cost of providing service," he noted. "Following this path of setting up bidding wars between" pharmacy providers "is favoring those [chains and large pharmacies] that are in a position to bid in order to gain market share and subsidize that operation." Aging Committee Chairman Pryor (D-Ark.) and six Senate colleagues urged the Office of Personnel Management to pursue "more aggressively" the inclusion of a "Medicaid-like drug rebate" in the employee program. In a March 19 letter to federal OPM Acting Director Patricia Lattimore, Pryor et al. "strongly" urged OPM to pursue "cost containment for the program," including drug rebates, "more aggressively." The letter notes that "it was the intent for a drug manufacturer rebate program to be instituted" for the Federal Employees Health Benefits prescription drug program's pharmacy management contract. However, the senators said, "there is little information available about whether such a rebate program has been developed, or is working." In addition, the letter states, "it is unclear whether cost containment approaches are being applied to the drug ingredient component in proportion to the contribution that it makes to overall program costs." The drug ingredient component of a prescription drug benefit packages usually is 70% of the budget, the senators contended. The letter notes that a June 17, 1992 letter sent soon after the proposal to restrict federal employees to a preferred provider network of pharmacies was announced, "strongly urged" OPM to develop such a drug rebate program to assure that all components of the benefit are subject to cost-containment efforts. The plan, which went into effect Jan. 1, covers more than 3.1 mil. federal employees and retirees enrolled in the drug program. In addition to their concern that the employee prescription drug program may not be focusing quickly enough on containing the cost of drug products, the senators said the program may "compromise some patients' access to medications" and "may unfairly deny participation by some pharmacies." Joining Pryor in signing the letter were Sens. Rockefeller (D-W.Va.), Sasser (D-Tenn.), Cohen (D-Maine), Glenn (D-Ohio), Dorgan (D-N.D.) and Johnston (D-La.). Pryor, Sasser, Cohen and Glenn authored the June 1992 letter to OPM.

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