IN THIS TIME of extreme political polarization, there aren’t a lot of issues that can unite all of us. Saving taxpayers and state employees tens of millions of dollars simply by modernizing a single contracting process, though, ought to be one.
As leaders of two organizations that have been on opposite ends of numerous debates over the years — a labor union and a free-market think tank — we have had plenty of policy disagreements.
However, this summer we put our political and ideological differences aside and supported a proposal to fundamentally change the way New Hampshire purchases prescription drugs. This one change will collectively save Granite Staters tens of millions of dollars.
Simply put, it would be one of the most significant health policy advancements in more than a decade.
Like most states, New Hampshire relies on pharmacy benefit managers (PBMs), companies that negotiate with pharmaceutical manufacturers and sell prescription medicines to health plans and pharmacies. They promise value and savings to state purchasers, taxpaying citizens and consumers at the pharmacy counter.
However, PBMs operate within a needlessly complex system that reduces the transparency of prescription drug prices. This past July, Gov. Chris Sununu and legislators passed a bill (HB 1280) that addresses this problem and promises huge savings for taxpayers and public employees.
The law directs the state to conduct an eBay-style dynamic reverse auction for PBMs vying to win the state’s business. Under traditional bidding, different PBM proposals used different complex formulas, making it impossible to do accurate comparisons.
This new reverse auction method uses a 21st-century online bidding system that gives the state more control over the bids. Finally, it’s possible to make “apples to apples” comparisons of PBM bids on the basis of their value. The system then uses multiple rounds of bidding, through which PBMs vie actively to underbid one another.
In our New Hampshire solution, PBMs will bid to fulfill contract terms determined by the state, not by the PBMs. This change puts control of these contracts, which total hundreds of millions of dollars, back in the state’s hands. A Josiah Bartlett Center study this year found that taxpayers can save up to $22 million per year over a three-year period.
The state’s new law achieves three critically important goals.
First, it helps address budget shortfalls at a time when we need bipartisan, fiscally responsible solutions. The state potentially could close a large portion of any pandemic-induced budget gap just by rebidding its PBM contract, avoiding budget cuts elsewhere.
Using this online reverse auction to procure a new PBM contract can redirect millions of taxpayer dollars in excess prescription drug spending back to our state budget, where such savings will be sorely needed next year.
In addition, the savings will provide relief at the pharmacy counter for Granite State patients in the midst of a pandemic, where taxpayers and consumers will see a reduction in their out-of-pocket costs.
Second, this change replaces an outdated PBM selection process with a 21st-century approach to PBM contracting that harnesses the power of built-in market incentives to drive down prescription drug costs.
Third, our new law will deploy this leading-edge data analytics technology to perform rapid electronic audits of prescription drug invoices that PBMs present to the state every two weeks.
This kind of ongoing, technology-enabled bill review (in use by many of the most successful businesses in the country) will enable New Hampshire government to monitor public dollars transferred to PBMs before they are spent, assuring that taxpayers are not being overcharged.
By using a similar state-of-the-art PBM bill review system, the state of New Jersey recently captured $42 million in PBM overcharges in a single year that might otherwise have gone unnoticed.
That’s exactly what a good government should do.
Our state is replacing the old public-sector paradigm of “pay now and audit later” with a more efficient, modern system that will do what New Hampshire often does — set a strong fiscal example for the rest of the nation.
At a time when we desperately need it, our state’s elected leaders have brought us a bipartisan health care solution that can help families pay lower prices at the pharmacy counter and preclude the need to make potentially painful budget decisions.
Given that it’s a plan so strong that it can bring two longtime ideological rivals like us together in support, the state should waste no time putting it into action. We are heartened that the state has begun the process of choosing a technology vendor to implement a reverse auction and encourage continued forward momentum to bring about these important savings.
Glenn Brackett of Northwood is president of the New Hampshire AFL-CIO. Andrew Cline of Bedford is president of the Josiah Bartlett Center for Public Policy.https://www.unionleader.com/opinion/op-eds/glenn-brackett-and-andrew-cline-saving-taxpayers-millions-of-dollars-is-an-issue-that-should/article_207bdfea-606e-5ab8-8077-dd296bb937d4.html
