Health Care

Contract prevents state auditor from reviewing VSEA pharmacy benefits

Doug Hoffer
Doug Hoffer
Attempts by the state auditor to determine whether Vermont is getting a good deal on prescription drug benefits offered through the state employees’ health plan have been stymied by the contract’s language.

“We explored the possibility of auditing the Express Scripts contract with the State but found that certain contract language prohibited us from accessing the information necessary,” State Auditor Doug Hoffer wrote in an email to lawmakers on the House Health Care Committee.

St. Louis-based Express Scripts is one of the largest pharmacy benefit managers in the United States – netting $1.3 billion in profits last year — and it holds the VSEA contract as well as a contract with the state’s largest private health insurer, Blue Cross Blue Shield of Vermont.

The House committee has proposed legislation that would require greater transparency from pharmacy benefit managers and ban certain practices.

Lawmakers on the committee have said the proposals are necessary to determine what portion of pharmacy costs go toward the provision of care versus benefit managers’ overhead.

The proposals are already seeing pushback from industry lobbyists, who argue greater regulation will ultimately lead to higher costs.

In his note to lawmakers, Hoffer said his office had hoped to determine whether that would actually be the case for the state employees’ health plan.

“Specifically, we wanted to assess whether the state achieved the lowest cost prescription plan as a result of selecting the ‘traditional’ vs. ‘pass-through (transparent)’ prescription pricing model,” Hoffer writes.

A “pass-through” model charges a flat fee for administrative services on each claim or on a per member, per month basis. Any savings from discounts a manager negotiates with pharmacies or rebates from drug makers pass through to the health plan. The rebates occur when the members of a health plan buy a certain amount of drugs the manufacturer has made eligible for a cost incentive.

Under the “traditional” model, a manager is under no obligation to pass on discounts or rebates to the health plan.

A pass-through plan is considered more transparent because it requires the manager to disclose all revenue streams.

The projected costs were a “significant component” of Vermont’s decision to hire Express Scripts and go with a traditional contract model, according to Hoffer.

The purpose of an audit would be to check the math and make sure the state is receiving a lower-cost prescription drug benefit, he said.

When Hoffer’s office attempted the audit, it discovered that, “certain contract language prohibited us from accessing the information necessary to answer the question.”

His office had hoped to do its own cost analysis in advance of VSEA’s signing another contract with Express Scripts last year. Hoffer alerted the attorney general and department of human resources, but the state went ahead and inked a two-year, $60 million contract containing the same audit-proof language.

Statute already requires the state’s pharmacy benefits manager to report the information Hoffer would need, but there’s a loophole that allows for the reporting to be bypassed as part of contract negotiations.

Hoffer told lawmakers that the state was “unwilling or unable” to remove that language in its last round of negotiations with Express Scripts.

An Express Scripts spokesman told VTDigger that one of the problems with transparency measures generally is that they could require a company to disclose proprietary pricing information.

Hoffer suggested lawmakers could update the statute to close the reporting loophole for the VSEA pharmacy benefits manager, but require that the information remain confidential, thereby allowing the contract to be audited.

Rep. Chris Pearson, P-Burlington, said the Health Care Committee plans to introduce legislation to close the loophole.

“The state dropped the ball on this contract,” Pearson said, “You shouldn’t sign anything that doesn’t allow you to know whether you’re getting a good deal.”

Kate Duffy, commissioner of the human resources department, which negotiated the contract, said Express Scripts offered the best bid in the state’s competitive bidding process.

Her focus during the negotiations was to procure excellent benefits for state employees at the most affordable rate for taxpayers, she said, and she believes the state came away with the best deal possible.

“We did have discussions with the auditor and were interested in achieving the desired language,” Duffy said. “We did not, however, have the ability to compel a more favorable bid, to demand lower prices, or to unilaterally write the contract.”

Legislation that the Health Care Committee has already added to a larger health care reform bill would preclude aspects of traditional model contracts and require reporting on others.

That’s caught the attention of the large national corporations that dominate the pharmacy benefits management industry.

Lobbyists for CVS Caremark and Express Scripts testified before the committee, saying that transparency will be expensive and the proposed regulations would drive up health care costs in Vermont.

Blue Cross Blue Shield of Vermont’s contract with Express Scripts uses a traditional model. Going with a pass-through model offered by Catamaran, a smaller pharmacy benefits manager, would have cost an additional $3.5 million, BCBSVT said.

That added cost isn’t entirely representative of the additional costs of a pass-through plan, however, because Express Scripts’ larger number of covered lives allows it to negotiate lower prices with drug makers.

The regulations under consideration at the Statehouse are likely to face continued resistance from that lobby, not because Vermont or its insurers are large clients, but because the state frequently drives the national conversation with its laws and regulations.

Rep. Sarah Copeland-Hanzas, D-Bradford, one of the lawmakers on the Health Care Committee leading the push for greater regulation, said she’s not concerned about pushback from the industry.

“As a matter of public policy, transparency and assurance that we know where our health care dollar is going is more important than protecting corporate profits,” she said.


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  • Ralph Colin

    Perhaps the Auditor should focus on checking out the costs of the plan which the Governor and Green Mountain Care intend to impose upon us in a couple of years. Looks like that could be more expensive than what we are now paying.

    Oh, I forgot: there is no Green Mountain Care plan and we don’t have the faintest idea what it may cost, but we’re going to be stuck with it in any case if the Governor has his way.

    What are you going to do about that, Doug?

    • Doug Hoffer

      We can’t audit something that doesn’t exist and we can’t audit a plan.

    • Walter Carpenter

      I wish Mr. Hoffer could audit Express Scripts in this situation. I would like to know how much they are costing us.

  • Tony Redington

    As a member of a VSEA negotiating team, we were well aware of the State refused to require the actual costs of prescription drugs to be known–auditable or not. It was outrageous then an it is outrageous now–but the administration under both Democratic an Republican governors went along with the practice and the taxpayer–and the all employees current and retired–paid and continue to pay a price which takes an unknown amount of money off the top and into the pockets of Express Scrips.

  • Kelly Cummings

    “Lobbyists for CVS Caremark and Express Scripts testified before the committee, saying that transparency will be expensive and the proposed regulations would drive up health care costs in Vermont.”

    “The proposals are already seeing pushback from industry lobbyists, who argue greater regulation will ultimately lead to higher costs.”

    If it weren’t so pitiful….it’d be laughable!

    Earlier today I commented on the toxic chemical bill. I pulled that comment from my earlier comment on the GMO labeling bill. And now I’ m commenting on this bill; yet again pulling the comment forward. Seems the only thing I really need to add, are two more names to the corporations and their associations list….CVS Caremark and Express Scripts.

    Just stick them in to the commentary below….right after Monsanto and the Vermont Grocers Association.

    TOYS and TOXINS?

    I can’t believe we even have to argue over this. Is this really happening?

    So here we are, another day another corporation or their association crying poor mouth. All in defense of their being free from any regulation that might safeguard the people. Let’s see here. This go round we’ve got IBM, Toy Industry Association, the Alliance of Automobile Manufacturers, Burton Snowboards, Keurig Green Mountain and Wal-Mart.

    Last week it was Monsanto, the biotech industry and the Vermont Grocers Association and the week before that….well, the list goes on.

    Wal-Mart? I can’t help but highlight Wal-Mart as an example because the only people associated with Wal-Mart who can legitimately cry poor mouth are their employees. For Cripes sake! We have to subsidize their employees because Wal-Mart won’t even pay them a livable wage! Wal-Mart calling poor mouth? Who do they think they’re kidding?

    And then the ultimate insult is this:

    “…Congress is considering a bill that would ban state legislatures from passing laws regulating toxic chemicals found in consumer products.”

    It is the same as this:

    “According to Reuters, US Rep. Mike Pompeo (R-Kan.) introduced legislation which is intended to head off bills in about 24 states that would require companies to inform customers when their food is produced using genetically modified organisms (GMOs). Titled the “Safe and Accurate Food Labeling Act,” the proposal would forbid states from enacting such proposals.”

    Anybody see a pattern here?

    If we want to be able to drink our water, breathe our air, eat our food, take safe and affordable prescribed medicines, drive safe vehicles, vote and have it count, have handicapped access, educate all our children, have real healthcare for all, have safe toys for our children, etc., etc., etc……I could go on and on, we need regulation. When profits are involved, without regulation, the well being of the people, the very heart of our democracy, is often the first consideration to be thrown into the trashcan.

    In today’s world money is King. Seems everything we do starts there. And everything we don’t do starts there. The oppression and separation this is causing in our country is incredible. We can’t sustain this. At some point the dam’s going to break. There must be a balance. And therefore a counterbalance is needed. Regulation.

    Not only have the excessively monied, greedy and powerful taken the cookies from the majority of the people in our country….they have now decided they want the crumbs and the jar too! How much will ever be enough for them?

    Without regulation the normal everyday common man and woman quickly become very very small. We are no match for the insatiable desires of corporations seeking the all mighty dollar. Ultimately, regulation is the only thing standing between us and the lions. We’re the meat! And they’re hungry…..they are always hungry.

    Toys and toxins? Poor mouth? I don’t think so. Shame on you. Enough is enough already. Why don’t you try giving back for a change instead of always taking.

    Like I said….if it weren’t so pitiful….it’d be laughable.

    I think it’s time to share a video. I will post it separately just in case it doesn’t make the cut.

  • Kelly Cummings

    Here’s that video. And out of respect for my fellow readers, I would like to warn you…if you are offended by the “F” word, please don’t watch this.

    http://www.upworthy.com/the-most-honest-and-awful-corporate-ad-i-have-ever-laid-my-eyes-on-no-they-arent-drunk-i-swear?c=reccon1

    • Paula Schramm

      This video is about the corporate response to climate change…. in this case the fossil fuel industries, among the very richest and most profitable corporations in the world. And it is an entirely accurate representation of their viewpoint, in spite of the fact that it’s a satire.

      It does seem to sum up the view of so much of the corporate world. Very sad and very scary.

  • John Bloch

    Folks I as on the VSEA bargaining team and at that time we were questioning Express costs and the State of WST VIRGINIA SUED EXPRESS SCRIPTS AND WON SOME SIXTY MILLION IN EXCESS CHARGES TO THE STATE,