False Alarm

Well, the President gave his deficit reduction speech yesterday and there was no mention of converting the FEHBP to a premium support program as Ezra Klein of the Washington Post and the Federal Times at least hinted on Tuesday, The Federal Times now reports

Although President Obama's deficit reduction plan unveiled April 13 does not include provisions cutting federal pay or benefits, changes to federal retirement plans are "on the table," an Office of Management and Budget official said Thursday. "It's not in the plan now, but it's something we're looking at," the official said. Obama is not currently considering cuts to federal pay, the official said.

Congress approved the FY 2011 appropriations bill (H.R. 1473) today. The Wall Street Journal reports that "The House voted 260-167 for the measure. The Senate followed soon after, voting 81-19 for the deal." Hopefully, this means there will be no government shutdown for at least five months, and after Congress returns from its Easter break, they can turn their attention to the FY 2012 appropriations and the debt ceiling issues, among others.

The FEHBlog, by the way, also will be taking an Easter break. My family and I will be visiting our younger daughter who is spending her semester abroad in Buenos Aires, Argentina. Her humorous blog about her adventures in South America can be accessed here.

In OPM's call letter for 2012 benefit and rate proposals, OPM encouraged plans to reduce prescription drug expenses, which is not a simple task in a Program with 50% annuitants. Fortunately, there are a plethora of blockbuster prescription drugs that are going generic later this year and in 2012.

When a prescription drug goes generic, typically one generic manufacturer will gain rights to exclusive distribution for six months. In the case of Lipitor, which goes generic at the end of November, the lucky generic manufacturer is Ranbaxy Laboratories of India.  Lipitor, a statin used to reduce cholesterol. has recent U.S. sales of  $5.3 billion At the end of the six month exclusivity period,  school's out. A Dow Jones story about Lipitor's conversion to generic status notes that

Increased client sophistication on drug pricing isn't the only factor that may limit generic Lipitor profits [by prescription benefit managers]. Experts note there's uncertainty over how many generic competitors will enter the market, which also could affect profits. The more competitors, the lower the drug price and greater opportunity for fat margins.

In addition, Wal-Mart Stores Inc. launched a retail generics price war a few years ago when it introduced $4 prescriptions for hundreds of unbranded drugs. If enough generics manufacturers sell unbranded Lipitor, it could wind up on the $4 list, and that could pressure PBMs further, said economist Larry Abrams, who follows the pharmacy benefit management industry.

AIS Drug Benefit News featured a story on the blockbuster drugs like Plavix, Singulair, and Lexapro that will go generic next year.  According to the report,“Everyone characterizes this as a landmark event in our industry, and I think it’s real,” Robert Galle, COO of pharmacy benefit management for Aetna Inc. tells [us] “The number of drugs coming off patent will create an unprecedented amount of activity. It affects almost 20% of our total drug spend.”  The article also discusses new plan sponsor approaches to incenting plan member utilization of generic drugs.

In the call letter, OPM also encourages FEHB plans to offer their members wellness programs. Business Insurance helpfully reports that "The U.S. District Court for the Southern District of Florida dismissed a lawsuit alleging that financial incentives to participate in a voluntary wellness program as part of a health plan provided to employees by Broward County, Fla., violated the Americans with Disabilities Act." There are other potentially tricky legal requirements around wellness programs and related health risk assessments under the non-discrimination rules of HIPAA and the Genetic Information Non-Discrimination Act (because family medical history is considered to be protected genetic information by the statute.)