The Association’s contract with PCS for retail prescription drug services began in 1993; its contract with Medco for mail order drug services began in 1987. Under its FEHBP contract, the Association must submit to OPM any proposal to change its federal employee health plan benefits. Between 1988 and 1995, the Association’s payments for the plan’s prescription drugs increased at an average annual rate of about 21 percent, compared with an average annual rate of about 12 percent for total benefit payments. 1). Before the benefit change, the approximately 800,000 people insured under the Association’s Standard Option Plan who also had Medicare part B coverage did not pay anything for prescription drugs purchased at network retail pharmacies or through the mail order program. Both OPM and Association officials contended that the change would promote more cost-effective use of the prescription drug benefit by encouraging enrollees to use the less expensive mail order program. The number of pharmacists was insufficient to handle prescription orders, and many enrollees did not get their prescriptions filled promptly. Concern About the Effect of the Benefit Change on Retail Pharmacies

NACDS and many chain and independent pharmacies foresee the benefit change shifting millions of dollars in prescription drug sales to the mail order program. 3.) PBM Performance Produced Savings in 1995

The Blue Cross and Blue Shield Association estimated that its two PBMs saved the plan about $505 million in 1995. I will be pleased to answer any questions.
Why GAO Did This Study

GAO discussed the Blue Cross and Blue Shield Association's change in prescription drug benefits covered under its federal employee health plan.

What GAO Found

GAO noted that: (1) the Association's payments for prescription drugs increased about 21 percent between 1988 and 1995; (2) to manage costs, the Association contracted with two pharmacy benefit managers (PBM) to provide retail prescription and mail order drug services; (3) to offset high prescription costs, the Association began requiring enrollees insured under the Standard Option Plan and covered by Medicare part B to pay 20 percent of their prescription costs at retail pharmacies; (4) the Association also encouraged enrollees to utilize the least expensive mail order option by offering prescriptions free of charge; (5) the demand for mail-order prescriptions surpassed contractor and Association expectations, causing delays in prescription orders and customer calls; (6) critics of the benefit change believe that millions of dollars in prescription drug sales will be shifted away from retail drug stores to the mail order program; and (7) the Association estimated that its two PBM saved $505 million in 1995.