Federal Advisory Council Vote Unanimously for More PBM Transparency with ERISA Health Plans

November 5, 2014

The National Community Pharmacists Association applauds the Department of Labor ERISA Advisory Council for voting unanimously yesterday to recommend that DOL extend existing financial disclosure requirements to pharmacy benefit managers.

Alexandria, VA. (November 5, 2014)

— T

he National Community Pharmacists Association (NCPA) applauds the Department of Labor (DOL) ERISA Advisory Council for voting unanimously yesterday to recommend that DOL extend existing financial disclosure requirements to pharmacy benefit managers.

Specifically, the Council recommended that PBMs should disclose to health plan sponsors (such as employers) all forms of direct and indirect compensation received in association with providing services to each health plan. The Council found that some forms of PBM compensation have the potential for creating conflicts of interest for PBMs and that disclosure of PBM compensation would better enable plan sponsors to determine if compensation paid for PBM services is reasonable.

The Council also recommended that the Department of Labor pursue issuing guidance to assist plan sponsors in determining whether and how to conduct a PBM audit of direct and indirect compensation. This recommendation was issued after hearing from numerous plan sponsors about the many different restrictions that PBMs try to impose on the audit process including trying to limit the pool of auditors and placing arbitrary limitations on the documents that can be examined.

“We commend the ERISA Advisory Council on its action and we are also excited that U.S. Labor Secretary Thomas Perez has indicated his desire to ensure those long-overdue changes are implemented,” said NCPA CEO B. Douglas Hoey, RPh, MBA. “In fact at yesterday’s meeting he said some remarkable things that echo many of the concerns expressed by NCPA. Secretary Perez said that it is important for plan sponsors to do a ‘deep dive’ on issues such as PBM compensation in order to ensure that beneficiary monies are not being ‘thrown away’ and that the plan is not leaving money ‘on the table’ that could be more wisely spent.”

Hoey added, “As U.S. Supreme Court Justice Louis Brandeis once famously said, ‘sunlight is the best disinfectant.’ These changes should help ERISA plan sponsors better understand whether the best value for their investments is being realized.”

Many of these issues were discussed during recent hearings of the DOL Advisory Council as it explored whether to create a more robust transparency mandate for ERISA plans. NCPA was invited to testify and offered specific recommendations. Additionally, the Council heard from, among others, representatives of Princeton University, the University of Michigan, General Dynamics Corp., on behalf of the HR Policy Association

(HRPA)

, and Honeywell International, Inc.

Each of these witnesses relayed how the lack of transparency on the part of PBMs has limited their access to data necessary in determining if they are getting the best value from their plan. Many noted that even employing a PBM consultant when initially selecting a PBM may not be of much assistance since many consultants have existing relationships with certain PBMs which they in turn recommend to their clients.

“It’s clear from the testimony provided to the advisory council that payers of prescription drug plans require more data to ensure that PBMs are delivering on the value they promised,” Hoey concluded. “The council’s vote is a critical step toward ensuring that happens.”

###

The National Community Pharmacists Association (NCPA®) represents the interests of America's community pharmacists, including the owners of nearly 23,000 independent community pharmacies. Together they represent an $88.8 billion health care marketplace, dispense nearly 40% of all retail prescriptions, and employ more than 300,000 individuals, including over 62,000 pharmacists. To learn more go to

www.ncpanet.org or read NCPA’s blog, The Dose, at

http://ncpanet.wordpress.com/.