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Local Stories, Broad Impact

Mon. Sep 9th, 2024
Nprime

New prescription benefits contract to offer ‘modest’ initial savings to state.

By Matthew. Jr
New prescription benefits contract to offer ‘modest’ initial savings to state.

An effort to save the state hundreds of millions in employee prescription costs will produce only “modest amounts” in the near future, Maryland Budget Secretary Helene Grady said Wednesday.

Her comments came at a Public Works Board meeting where the three-member board unanimously approved a contract that will pay San Diego-based MedImpact Healthcare Systems more than $1.3 billion to administer the benefits. pharmacy for state employees, retirees and social benefit plans.

The contract comes with two optional two-year extensions that could bring the full seven-year deal to more than $2.4 billion.

The contract was auctioned in a “reverse auction” process, where bidders compete with each other to provide what the state has asked for. The winning bidder is usually the one who is willing to accept the lowest amount.

Similar processes have been used in other states to reduce the cost of prescription drug plans for government employees.

In Maryland, however, the auction drew only two qualified bidders.

Maryland Budget Secretary Helene Grady. File photo by Bryan P. Sears.

“Compared to the current contract, we estimate that the MedImpact contract will save the state modest amounts in the early years, starting with approximately $1 million in calendar year 2025, $12 million in calendar year 2026 and $22 million in calendar year 2026. 2027,” Grady told the board. “Projected savings increase in the later years of the contract.”

The current contract holder, CVS Caremark Health, filed an appeal with the Maryland State Board of Contract Appeals when it failed to keep the contract. But last week, the contract commission rejected the appeal, not on the merits of the case, but because Caremark filed its appeal late.

State law allows an appeal to be filed within 10 days of a decision. The deadline includes Saturdays, but not Sundays or public holidays. Caremark officials said they initially thought there was precedent that would allow them to file Monday.

“Obviously, we regret this decision at this time, but it was in our effort to ensure we had the most detailed and accurate information to present to the appeals committee,” said Cheryl Byron, vice president of sales and account services. for CVS Caremark.

Byron asked the board to resubmit the contract for a rebid.

“We believe the state’s rollout of its new reverse-auction procurement process has led to a situation where competitive bids have not been objectively compared to each other,” Byron said. “There is too much at stake for the contract to be completed in a hurry when so many questions remain.”

Byron said her company is prepared to continue the current contract but offer lower prices contained in their bid for the new contract.

“Our bid, as we indicated, was extremely competitive and we are prepared to offer … our first year, price points that would provide the state with over $100 million in value savings in the first year,” said Byron to the board. .

Comptroller Brooke Lierman (D) said she was concerned that Maryland, which used the reverse auction process for the first time since the law passed in 2020, did not maximize the potential savings.

Controller Brooke Lierman (d). File photo by Bryan P. Sears.

“I think the reverse auction process is the right one,” Lierman said. “It has produced major savings in other states, such as New Jersey, where it is estimated that they will save about two and a half billion dollars in drug costs over a certain number of years.

“I think the challenge that I have here — and that I hope will be fixed the next time we do this — is that we only have two bidders. You just don’t accrue the savings that they should in a reverse auction when you only have two bidders,” she said. “And I don’t even know that it fully fulfills the legislature’s intent to use this aggressive reverse bidding process to secure the savings.”

Lierman said he believes the state should try to offer the contract again at the end of the initial three-year term.

“I don’t think it should be understood that these renewal options are going to happen,” she said. “Definitely not a given in my book considering there are only two bidders.”

“Crossing the T’s and the Dots” in port assistance

The board also approved an $800,000 contract amendment to set up a system for issuing supplemental loan checks to federal workers affected by an early government shutdown last fall and this spring. That never happened, but the program was revamped this spring to administer payments to dock workers after the Francis Scott Key Bridge collapse.

That change targeted Lierman and another council member, Treasurer Dereck Davis (D).

Davis said he was “fully on board” with assisting port workers, but questioned the mechanism, comparing it to a practice no longer used in the Legislature where a bill would be dismantled and reused.

“Ultimately, the attorney general’s office told us we can’t continue to do this, that it’s unconstitutional,” Davis said. “I use that to say that the vehicle we’re using was originally for the federal shutdown, which was an emergency purchase, but nothing else between what we’re doing today and that’s similar, other than it was just a purchase emergency. .”

Davis asked if state Commerce officials sought an opinion from the Attorney General’s Office before moving forward.

Maryland Treasurer Derek Davis (D). Photo by Bryan P. Sears

“So how confident are you that this will stand up to scrutiny?” Davis asked. “We took a procurement that wasn’t related to the Key Bridge, it was related to the federal shutdown, and we’re basically decommissioning all of that and putting this in, and then we’re moving forward without having to do a procurement.”

Deputy Commerce Secretary Jason Perkins-Cohen sidestepped the question, telling Davis he believed there were “a lot of similarities” between the port emergency and a potential government shutdown.

“In both cases, we’re asking to build an outward-facing portal for workers in the state of Maryland who have been unable to work through no fault of their own,” Perkins-Cohen said. “And in both cases, it was expected that it would be of relatively short duration and that they would be able to return to their jobs once that crisis was averted, whether it was a stop or a bridge, and that, because it was essentially the same general requirements, I thought made sense.”

The state sent about 44,000 bridge relief checks totaling $55 million to affected workers and businesses through various programs created after the March 26 bridge collapse that killed six people. Those payments include assistance for about 3,300 workers who were affected by the port’s temporary closure while crews worked to clean up the federal transport channel in the Patapsco River.

Even so, Lierman said that “the treasurer and I have had concerns about this particular contract for the last six months, and so I appreciate the difficult situation the department has been in, and we would only ask in the future to make sure that we cross T’s and dot Is’s with our AGs before we make this type of substitution.”

Ultimately, Davis and Lierman joined Gov. Wes Moore (D) in approving the amended contract.

By Matthew. Jr

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