Innovative Online Auction for Pharmacy Benefit Management Services Captures Savings, Preserves Employee Benefits
TRENTON – As the result of an innovative legislative plan developed by Senate President Steve Sweeney, the State of New Jersey has awarded a best-in-class pharmacy benefits contract that will save New Jersey taxpayers an estimated $1.5 billion on prescription drug spending over the next three years without imposing benefit cuts on state health plan beneficiaries. The state awarded a contract to use the “reverse auction” plan to administer prescription drug benefits for current and former public workers.
“This is a unique and innovative approach to purchasing prescription medicines. By adopting our plan, the State has realized enormous savings for New Jersey taxpayers without any additional costs to public employees, ” said Senator Sweeney, who worked on the initiative for the past 16 months in partnership with New Jersey public employee unions, government officials and America’s Agenda, a nonprofit health care coalition and think tank. “The online auction, powered by a cutting-edge technology platform, creates a dynamic, truly competitive marketplace in which PBMs bid and counter bid against one another for the State’s business. Think of it as an ‘eBay’ for PBMs.”
The legislation authored by Senator Sweeney, S-2749, enabled the state to rapidly conduct a state-of-the-art competitive online auction to select a new pharmacy benefit manager, or “PBM,” for purchasing and supplying prescription medications to over 750,000 public sector health plan beneficiaries in New Jersey, including public school teachers and other educators, state and local government employees, firefighters, police, their dependents and retirees.
In calendar year 2018, the state’s new PBM contract will save New Jersey nearly $350 million from prescription drug costs that New Jersey would have paid under its current PBM contract. Even larger dollar savings are estimated for calendar years 2019 and 2020, the second and third years of the state’s new 3-year PBM contract. “But that’s just the beginning of the new savings we are capturing for State taxpayers,” said Senator Sweeney. “We are deploying the same technology platform that ran the reverse auction to electronically audit each PBM invoice claim-by-claim and line-by-line to flag errors and overcharges above prices that should be charged under our new contract before the bills are paid by the state.
“We are rooting out PBM profiteering at the expense of New Jersey taxpayers and public employees,” Senator Sweeney said. “We are achieving enormous savings without any cuts in public employee benefits and no compromises in the quality of health care for hard working public employees and their families.”
The advanced technology platform that the state deployed to conduct the online PBM auction applied common pricing assumptions, prescription drug price lists, and prescription drug price data sources to calculate the actual dollar costs to the state of complex PBM drug pricing proposals. The technology generated “apples-to-apples” comparisons of the actual cost to the State for each PBM proposal as the PBMs competed anonymously with one another’s proposals to provide services at lowest cost, while conforming to best-in-class contract terms required by the State as a condition for participating in the online auction.
“We are transforming New Jersey into a disciplined, 21st Century buyer of health care services and prescription medicines. The Patient-Centered Direct Primary Care Program that I introduced for public employees two years ago was a first step in this transformation. Modernizing the way the state buys prescription medicines was a second step. Real-time electronic auditing of PBM invoices will be a third step. Already, New Jersey taxpayers are seeing really significant health cost savings from these efforts,” Senator Sweeney said. “Expect more advances like this.”
The PBM auction technology platform has been used by large public employers like the University of California and several Fortune 100 corporate employers. Senator Sweeney’s plan will make New Jersey the first State to deploy the technology — an achievement that will save taxpayers hundreds of millions of dollars per year for the foreseeable future.