OHIO PUBLIC EMPLOYEES RETIREMENT SYSTEM 277 EAST TOWN STREET, COLUMBUS, OH PERS (7377)

Transcription

1 OHIO PUBLIC EMPLOYEES RETIREMENT SYSTEM 277 EAST TOWN STREET, COLUMBUS, OH PERS (7377) MEMORANDUM DATE: July 10, 2007 TO: FROM: OPERS Retirement Board Members Scott Streator, Director of Health Care Brian Pack, Assistant Director of Health Care Lynne Hamilton, Health Care Business Administrator RE: I. Discussion Item: A. Pharmacy Benefit Manager Selection for the Rx Ohio Collaboration As you recall, three topics were presented and approved at last month s Health Care Committee meeting: The Health Care Preservation Plan 2.0, 2008 Rate Setting/ 2008 Plan Design and the Rx Ohio Collaboration/Pharmacy Benefit Manager (PBM) selection. During the PBM selection discussion, the Board had requested several follow up questions to be answered regarding the recommended PBM. Last week, Staff provided the Board additional details with the final PBM consultant report and recommendation (Buck Report); a letter answering several follow-up Board questions; and a response to questions by Catalyst Rx subsequent to the June meeting. Staff will provide background on the procurement process and be available to provide additional detail and answer any remaining questions on the RFP selection process. The lead consultant from Buck Consulting, Mr. Michael Jacobs, will also be present at the July 17 th Health Care Committee meeting. Attached are two prior Board memos (September 2006 and March 2007) and a document outlining the milestones for this initiative. Attachments

2 OHIO PUBLIC EMPLOYEES RETIREMENT SYSTEM 277 EAST TOWN STREET, COLUMBUS, OH PERS (7377) MEMORANDUM DATE: September 5, 2006 TO: FROM: RE: OPERS Retirement Board Members Scott Streator, Health Care Director Discussion Item: Prescription Drug Purchasing Initiatives Purpose: To update the Board on several Pharmacy Benefit Management (PBM) drugpurchasing initiatives to further capitalize on OPERS purchasing power. In summary: 1) Select a consultant to assist in selection of a PBM for 1/1/08 as part of due diligence process. 2) Assess the added value to OPERS for a broader purchasing pool whereby OPERS-negotiated Rx discounts can be made available to OPERS employers by the PBM. 3) Select a PBM with a business model that best optimizes OPERS expenditures and service delivery to members. Background: As you recall, a feasibility study was performed to examine the benefits and risks of a health purchasing pool. GRS completed the study and concluded one of the most viable options, with little or no risk, was forming a prescription drug purchasing pool beyond the current Ohio Retirement Systems. This may lead to enhanced discounts and improved service for OPERS while offering OPERS employer groups the substantial discounts we are able to obtain. Other health improvement programs could also be coordinated to improve the health status of current members/future retirees. At the same time, Staff continually evaluates the performance and capabilities of current and potential business partnerships. The Pharmacy Benefit Manager, currently Medco, provides OPERS with drug discounts, benefit administration and oversight to the drug distribution process. To assist in the PBM selection,

3 Staff has issued an RFP for a PBM Consultant and is in final stages of the selection process. Our objective with the consultant is to identify the PBM with the best business model that aligns with our priorities of servicing the membership while preserving healthcare for the future. As you recall, 2005 was a successful year due to the active management of the pharmacy benefit and Board-approved changes in benefits. The 2005 financial results on a per member per month trend (PMPM) for prescription drugs were as follows: Actual Projected National PMPM: -0.4% 11.1% 11.4% (Mercer) This helped produce a positive net gain in solvency from 17 years to 18 years. Issues: These results are difficult to obtain every year without ongoing benefit changes or improvements within the PBM delivery model. Therefore, evaluating structural changes within the current Rx supply chain are necessary and can be more easily accomplished when pooling health plan sponsors for common services. Prescription drug management has the following challenges that will require a collective voice to address: Economic alignment of pharmacy benefit manager and pharmaceutical manufacturer business models, retiree membership growth, biotech proliferation, member communication, and drug inflation to name a few. These challenges underscore the necessity to actively manage the health benefit, examine viable options and advocate for changes in the broader pharmaceutical manufacturing industry. Staff has coordinated and developed an RFP for a PBM consultant with STRS Ohio, the second largest retirement system after OPERS. The other Ohio Retirement Systems have elected to not participate in this process at this time. Other large Ohio public sector groups including The Ohio State University and Ohio DAS have expressed interest as a multiple public sector entity to collectively negotiate with a PBM as well. Next Steps: 1) Finalize consultant selection to assist in a PBM RFP for a new contract beginning 1/1/08 and develop the RFP for PBM vendor selection as part of the due diligence process. Ohio PERS has a long-standing relationship with Medco and has regularly conducted open bid evaluations to determined overall best value.

4 2) The consultant will determine the value to Ohio PERS participation in Rx purchasing pools with other public or private plan sponsors. Ohio PERS is one of the largest purchasers of prescription drugs in Ohio outside the Federal government. The GRS Purchasing Pool Feasibility Study recommended exploring the formation of an Ohio PERS Rx Purchasing Pool that would benefit both Ohio PERS and our active employer groups. 3) The consultant will assist in evaluating other viable Rx purchasing options that could lead to greater value for Ohio PERS membership in terms of cost savings or improved clinical outcomes. From analysis done by The Ohio State University for OPERS, there may be considerable savings if drug therapy selection was managed differently by the PBM. Potential long-term options include creating an Ohio-based PBM that leverages Ohio medical and pharmacy colleges expertise and resources. This and other topics will be discussed in greater detail at the October Health Care Retreat.

5 OHIO PUBLIC EMPLOYEES RETIREMENT SYSTEM 277 EAST TOWN STREET, COLUMBUS, OH PERS (7377) MEMORANDUM DATE: 3/7/07 TO: FROM: RE: OPERS Retirement Board Members Scott Streator Director, Health Care FYI: Pharmacy Benefit Manager RFP and Rx Collaborative Purchasing Pool Update Purpose: Provide an update of the project. Background: Last year, OPERS invited several large, public sector purchasers to participate. The broad objectives identified were: 1) To leverage public sector purchasing power, and create pricing that will encourage and benefit all; OPERS and our employer groups. 2) To create a strategic purchasing model, with a number of key priorities that would improve the healthcare delivery model offered by the Pharmacy Benefit Manager (PBM) industry including: a) Innovation: A focus on clinical outcomes and utilization management rather than just discount. b) 100% transparency with the resulting pass-through of all discounts c) Utilizing Pay-for-Performance (P4P) Models d) Incorporating an Ohio-based Pharmacy and Therapeutics (i.e., drug selection) expertise to instill evidenced based medicine, improve outcomes and focus on preserving healthcare. We initially worked with all of the Ohio Retirement Systems, ODAS and The Ohio State University to develop a set of strategic initiatives and invite participation. At present, STRS Ohio and SERS are part of the actual RFP process while other

6 groups have expressed interest and may join at a later time due to procurement cycles or constraints. Last October 2006, following a competitive selection process, Buck Consulting was chosen to assist the Rx Ohio Collaborative. The RFP was developed with Buck, finalized in December, and distributed to a broad range of possible respondents. Both the large, traditional 'big box' PBMs and potentially more flexible, smaller organizations were invited to respond. January, February 2006 Narrowing the Field - The Rx Ohio Collaborative (or ROC) had eleven responses to consider. With the assistance of Buck, the eleven were scored based on three weighted factors: Strategy/Innovation to optimize pharmaceutical expenditures (45%), Service/Operational issues (35%), and Financial/Pricing (20%). Using the scores, the field was narrowed to five. On February 19 and 20, the five semi-finalists made presentations to OPERS, STRS, and SERS. Each semi-finalist left those meetings with follow-up items and 48 hours in which to respond. The semi-finalists are: Catalyst Medco Caremark MedMetrics Express Scripts The Status Today/Next Steps Buck is working with the Systems to analyze the additional responses, seeking to establish parity among the various financial presentations. Two finalists will be selected based on a reassessment of financial offerings as well as the other selection criteria first identified. The systems will conduct site visits as necessary. Final selection should be completed by the April or May timeframe. Staff anticipates providing the Board with a recommendation by the May or June meeting.

7 Pre RFP Milestones : Health Care Preservation Plan developed and approved with supporting Guiding Principles to maximize group purchasing power. March 2005: Health Purchasing Pools Concept presented to Board. November 2005: Health Care Consultant Recommendation to form Rx Purchasing Pool. Spring 2006: OPERS participated in several discussions with representatives from the STRS Ohio, SERS, OP&F, ODAS and The Ohio State University to discuss ways health care programs of these organizations could join together to form a collaborative group to leverage the purchase of prescription drug benefits. The group then solidified vision statements and branded the collaborative effort as the Rx Ohio Collaboration (ROC). September 2006: Board memo outlining process to date. October 2006: Board Retreat identified key business development priority to better align economics in the healthcare system while leveraging our purchasing size. October 2006: Following a competitive selection process, Buck Consulting was chosen to assist the Rx Ohio Collaborative. The RFP was developed with Buck, finalized in December, and distributed to a broad range of possible respondents. November 16, 2006: Bernie Smith, attorney with Tucker Ellis and West, assigned as Outside Legal Counsel. March 7, 2007: Project update of Pharmacy Benefit Manager RFP and Rx Collaborative Purchasing Pool in Board Memo. April 18, 2007: Board Health Care Committee HCPP 2.0 presentation. Rx Ohio Collaboration (ROC) presented as a potential health care lever with a conservative projected 2008 fiscal impact of $25M. May 16, 2007: Board Health Care Committee HCPP 2.0 presentation. Rx Ohio Collaboration (ROC) presented as a health care lever; no change from April s HC Committee. June 20, 2007: Board Health Care Committee health care staff present PBM selection process and recommendation to enter into contract negotiations with Express Scripts.

8 RFP Process Overview December 2006: Web-based erfp bidding tool developed with more than 470+ RFP questions. Buck Consultants issued the RFP to more than 25 vendors. February 6, 2007: ROC received eleven vendor responses to consider. Responses scored on three weighted factors: Strategy/Innovation to optimize pharmaceutical expenditures (45%), Service/Operational issues (35%), and Financial/Pricing (20%) and minimal requirements/thresholds. February 7-17, 2007: Buck Consultants evaluated 11 vendor responses. February 19-20, 2007: Five bidders were selected to make presentations. The five vendors were: Catalyst Rx, Caremark, Express Scripts, Medco and MedMetrics. March 2007: SERS signed Memorandum of Understanding and joins The Rx Ohio Collaborative (ROC) the RFP process. March 22, 2007: Best in Class models and approaches discussed and evaluated by ROC entities and Buck Consultants. March 29, 2007: Three finalists (Catalyst Rx, Express Scripts, and Medco) were invited to and made finalist presentations. Requests for additional information were made by the ROC at these meetings. Early April: Buck Consulting facilitates receipt of ROC questions and evaluates responses from each vendor (Catalyst Rx, Express Scripts, and Medco). April 12, 2007: ROC entities move forward with exploration of the Best in Class model based on information obtained in the RFP process to date. May : ROC entities meet and two finalists selected (Express Scripts and Catalyst Rx) for purposes of conducting site visits. May 7-24, 2007: Site visits were made to each organization as well as to their specialty and mail order facilities. June 1, 2007: ROC participants met and a debriefing of the site visits was held.

9 June 6, 2007: ROC entities and Michael Jacobs met and determined the order of the top two finalists in order to make a recommendation to each ROC entity s Board requesting to enter into contract negotiations. June 20, 2007: Board Health Care Committee health care staff present PBM selection process and recommendation to enter into contract negotiations with Express Scripts.