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March 29, 2010
TOPEKA Kansas should take a closer look at its contract with CVS Caremark, the company that provides pharmacy benefits to state employees, a House committee was told Monday.
"CVS Caremark has failed to offer Kansas the lowest prices on hundreds of generic drugs," said Casey Cabalquinto of Change to Win, a national union group that he said advocates for improved pharmacy benefits for workers.
Cabalquinto and others critical of CVS Caremark spoke or presented written testimony at an informational hearing held by the House Committee on Government Efficiency and Fiscal Oversight.
Their main charge was that about 300 generic drugs are commonly available to the general public for significantly less cost than they are to those enrolled in the state employee health plan.
Cabalquinto also urged the committee to consider an audit of CVS Caremark's rebate arrangements, saying the state's contract guarantees a minimum discount price for drugs but that it remains unclear whether the state has received all the rebates it is due.
According to his testimony, the Maryland Department of Legislative Services in a February 2009 audit, reported that CVS "collected more than $10 million in potential overpayments and undisclosed rebates."
The state employee's health benefit plan contracts with CVS Caremark to provide drug benefits to the more than 95,000 people the plan covers. The plan's enrollees include state workers, retirees and other local government employees and their dependents.
The contract currently is being renegotiated, according to Doug Farmer, deputy director of the Kansas Health Policy Authority and the benefit plan's manager.
Farmer told legislators that the pharmacy contract undergoes several levels of review before it is awarded and is ultimately decided and approved by the Health Care Commission, which among other things oversees the benefit plan's design. The Health Care Commission includes current and former state employees.
Farmer said the contract is awarded chiefly on the basis of cost but also on the ability of the contractor to deliver services statewide through a broad network of pharmacies. He said CVS Caremark currently works with 95 percent of Kansas pharmacies. And not all potential vendors could handle the paperwork demands of serving the state employee health plan and the hundreds of thousands of claims from it that must be processed.
"Lots of them can't handle the claims flow we have," he said.
With respect to the cost of generic drugs, state contract negotiators must take into account the full range of drugs needed by plan members, Farmer said.
"When we bid," he said, "it's not just for 200 or 300 generics. It's for the best deal on all drugs."
Jim Hughes, a corporate spokesman for CVS Caremark, in an email told KHI News Service that Change to Win "is intentionally misleading the public," about the company's performance "because we refuse to waive employees' rights to vote confidentially in union elections."
Brad Smoot and John Bottenberg are registered as the company's Topeka lobbyists. They attended the hearing but did not testify.
At least one committee member said he wasn't buying the union's complaints.
Rep. Melvin Neufeld, R-Ingalls, said the company has been doing a good job and has an extensive network of Kansas pharmacies with which it works.
He said he doubted the unions' motives.
"It's just basically the union's attempt to insult CVS because CVS demands having a secret ballot on their union stuff," Neufeld said. "That's what the whole thing's about. Nationally, the unions are going after CVS every place there's a contract."
Neufeld said the company has met contract standards and the state's expectations.
"The performance standard they have to make is 99.9 percent and they had one indicator that they fell a few hundredths of a point below and they did pay a penalty for not making that one but they were still in the high 90s just not 99.9 percent," Neufeld said. "I think their peformance is pretty much on mark for what you'd want from a contractor. The big deal is that about 90 percent of pharmacies are signed up. If you have a low error rate and have the network out there, there's not much else the state can require."