Comptroller issues pharmacy benefits RFP aimed at increasing transparency

HBJ PHOTO | Matt Pilon State Comptroller Kevin Lembo in Bushnell Park.

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By Will Healey | Journal Inquirer

The state comptroller’s office has issued a request for proposals for a new state pharmacy benefits agreement that aims to increase transparency and eliminate “hidden wealth exchanges” between pharmacy benefit managers and drug manufacturers.

The move seeks to make the state’s pharmacy benefits contract the “most innovative and transparent” in the nation. It follows legislation unanimously passed by both houses of the General Assembly in the last legislative session that requires drug companies to be more transparent about their pricing.

The legislation included requiring companies to report what they’re paying in rebates to pharmacy benefit managers, who are essentially “middlemen” between drug companies and insurers who determine what drugs are covered by insurance.

State Comptroller Kevin Lembo, whose office administers health care and prescription benefits for more than 200,000 public employees, retirees, and their dependents, said in a news release that the “broken national model for pharmaceutical pricing” has allowed pharmacy benefit managers to “operate in the shadows,” keeping employers and patients in the dark about where their money is going.

Lembo said the state is seeking a “new paradigm in pharmacy benefit contracting” that will clearly outline administrative fees per drug in order to put an end to “hidden incentives that put drug profitability above the state plan and patients.”

“We are putting every bidder on notice that the state of Connecticut is calling the shots on prescription drug costs and quality,” he said.

The RFP, which had a submission of intent deadline of Nov. 30, called for increased transparency, scrutiny, and new pricing models, according to the release.

Transparency will be increased by requiring that the entirety of all drug manufacturer payments to the pharmacy benefit manager be provided to the state, and the state will only pay the amount the pharmacy benefit manager paid each pharmacy for the cost of filling prescriptions. This will eliminate “spread pricing,” which is the practice of pharmacy benefit managers charging plans more than what they paid.

Bidders will also be required to provide “frequent data feeds” to disclose all net costs “post manufacturer rebate,” so that the state has full information on the actual cost of medication. The data requirements will be subject to audits in order to verify compliance.

New pricing models outlined in the RFP call for drug costs guaranteed by pharmacy benefit managers to be based on a per-patient or per-unit basis, rather than a discount off of the “average wholesale price.”

According to the release, pharmacy benefit managers currently benefit from average wholesale prices because they make it easier for them to meet their pricing guarantees while maximizing the amount of revenue they retain.

The release also said that basing drug costs off of the average wholesale price model doesn’t always favor the “lowest cost therapeutically equivalent drugs” but instead favors the drugs for which the pharmacy benefit manager can achieve the greatest discount off of the average wholesale price.

Moving to the per-patient/per-unit model, the release said, incentivizes pharmacy benefit managers to prefer the highest value drugs rather than those that help the pharmacy benefit manager “maximize revenue.”

The RFP also requires bidders to conduct annual market checks to ensure the state plan is getting the best market pricing.

Additionally, the RFP calls for applicable drug rebates to be provided to consumers at the pharmacy counter, and requires pharmacy benefit managers to offer a reduced generic copay to consumers if a lower-cost therapeutically equivalent alternative is available.

This requirement, the release said, will block pharmacy benefit managers from the “troubling practice” of offering lower copays for more expensive drugs over generic ones.

The RFP also seeks to reduce prescription drug waste by limiting first-time prescriptions to 30-day fills after an analysis found that 30 percent of 90-day first-time fills were never refilled.

New data sharing among doctors, nurses, and other prescribers is also called for under the RFP. The state’s new pharmacy benefit manager will be required to provide new tools embedded in prescribers’ electronic medical records systems that will allow them to see the actual cost of the medications they’re prescribing as well as equivalent alternatives. This will allow prescribers to make an informed choice when interchangeable drugs are available.

According to the release, the RFP drew “strong interest.” Tara Downes, spokeswoman for the comptroller’s office, said Monday that the office received six bids for general pharmacy benefit manager services, and three that were looking for a “specialty drug carve-out only.”

Downes said the number of bids received compares “favorably” with previous RFPs.

Lembo and his staff are in the process of reviewing the proposals, according to the release, along with members of the state’s Health Care Cost Containment Committee. Downes said the final award will be made March 30.

According to Downes, the comptroller’s office spends nearly $2 billion annually on health care.