Sweeney Plan Could save $200M in Prescription Costs for Public Workers

As part of his ongoing quest to curb New Jersey’s escalating healthcare costs, Senate President Steve Sweeney has called on the state to hire a technology firm that can aggressively identify cost savings in the prescription benefit plans that cover scores of government workers.

Sweeney (D-Gloucester) said hiring a high-tech pharmacy benefit manager to review prescription invoices in real time and proactively search out lower prices would save hundreds of millions of dollars in the coming years, without eroding patient benefits. The state now spends nearly $2 billion annually to provide medications to almost 700,000 state, county and local workers, teachers, and retired staff.

The technology — which involves an online “reverse auction” in which sellers offer drugs starting at high prices, then bid each other down over time — is already employed by corporations like American Airlines and large public entities like the University of California. But Senate staff said New Jersey would be the first state government to put these services to the test.

“This is a unique and innovative approach that will enable us to save at least $200 million a year by cutting improper overcharges on prescriptions for state, county and municipal government workers and for teachers without any additional cost to public employees,” Sweeney said. “This will help ensure that the state pays the proper reimbursement amounts for prescription drugs – and not a penny more.”

The legislative proposal was announced on Thursday, just hours before it received unanimous support from the Senate budget committee. It also has support from a number of public unions and local drugstore owners, among others.

“The Senate president is on target with this legislation,” said Anthony Reznik of the Independent Pharmacy Alliance, which has also sought ways keep drugs more affordable. “This is an all-important transparency measure.”

Sweeney has made it a priority to address New Jersey’s spiraling public benefit and pension costs, working with America’s Agenda, a national labor, business and healthcare group seeking affordable healthcare solutions, to identify opportunities for reform and savings. As a result, Sweeney led efforts to expand a “patient-centered” care model for government workers, designed to save money and improve outcomes, and has championed other insurance models geared to cut costs for consumers.

New Jersey expects to spend more than $3.7 billion on healthcare for public workers this year and officials said these costs are going up as much as 7 percent annually. In the current budget, Gov. Chris Christie called for nearly $250 million in savings, something officials are still struggling to figure out how to achieve.
Targeting prescription drugs for cost reductions is not new. In 2010, then Gov. Jon S. Corzine signed a deal with a pharmacy benefits company, Medco Health Solutions, of Franklin Lakes. Medco – which has since been bought out by Express Scripts – suggested they could save taxpayers some $540 million over the five-year contract. But, while the contract was extended for several years, the company’s effectiveness may be hard to judge; observers said it had not been audited and the Treasury Department, which oversees the contract, could not provide details on savings late Thursday.

Sweeney said he has been working with America’s Agenda and others for nearly six months on the latest proposal (S-2749), a copy of which was obtained by NJ Spotlight, as it is not yet posted online. He said the process depends on modern technology that enables users to obtain the lowest price by comparing bids from various vendors, who would be competing anonymously in real time. The system also enables online comparisons to ensure there aren’t better deals available elsewhere.

“Under this plan, the state would hire a technology firm with the capacity to electronically audit all prescriptions, compare them against the prices that should be charged, and flag overcharges before the bills are paid by the state,” Sweeney said. “This approach produces real savings on employee healthcare benefits for state, county, and municipal governments and school districts – that means for local property taxpayers and state taxpayers – without any change in the quality or cost of that health care to public employees.”

As drafted, the bill calls for an expedited hiring process. It waives the requirement for public bidding and requires the Treasury Department to solicit proposals from a company with the qualifications and technical capacity to do this work.

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