NJEA has begun to analyze a recent New Jersey Superior Court decision regarding the SEHBP/SHBP prescription drug bidding process.
IMPORTANT: The case in question has nothing to do with the level of benefits that active or retired members receive. While we are reviewing it carefully, it is NJEA’s understanding that active and retired members receiving prescription coverage through the SEHBP will not see any change in their level of benefit as a result of this decision.
Instead, the decision grows out of a dispute between vendors about whether the winning vendor’s bid should have been eligible for consideration by the state during the competitive bidding process. However, no matter who is the prescription vendor for the SEHBP/SHBP, changes can only be made through the respective plan design committees. A prescription vendor has no ability to change the level of benefit.
For additional information on the technical aspect of this case, continue reading below.
On January 1, 2018 the SEHBP and SHBP switched prescription drug vendors from Express Scripts to OptumRx. This change occurred after a long advocacy effort by NJEA to change the way the process for selecting a prescription drug vendor was done. NJEA advocated for a bidding process under which prescription drug vendors would enter into a “reverse auction” that would make prescription drug benefit providers bid against each other in a transparent and much more competitive bidding process.
The vetting phase of that process began in May 2017 when the State of New Jersey’s Procurement Bureau issued a bid solicitation for a pharmacy benefits manager (PBM). This solicitation allowed PBMs to show their ability to provide services to the almost 800,000 actives and retiree members in the SEHBP and SHBP. The responses were also analyzed to be sure that all PBMs conformed to the solicitation. PBMs that demonstrated the ability to handle the large population of members, and whose bids conformed to the solicitation, were allowed to continue to the “reverse auction” phase of the process which compared project costs based on each PBM’s proposed pricing.
On June 29, 2017 after the “reverse auction” was completed, OptumRx was selected as the new PBM beginning January 1, 2018. Within a few days, the current PBM, Express Scripts, filed an appeal. On December 21, 2017, the courts awarded a stay based on the merits of the Express Scripts filing, but ultimately allowed the contract to continue after realizing that a stay that was so close to the January 1, 2018 changeover would cause extreme disruption. Although the courts allowed the changeover to continue, they did state that the case would continue to be heard.
On May 11, 2018 the courts found in favor of the Express Scripts appeal. The courts found that during the solicitation stage that the OptumRx bid should have been found to be non-conforming and they should not have been offered the opportunity to continue to the “reverse auction” stage. In its decision the court stated “As the Supreme Court wrote over sixty years ago, “all bids must comply with the terms imposed, and any material departure therefrom invalidates a nonconforming bid as well as any contract based upon it. If this were not the rule, the mandate for equality among bidders would be illusory and the advantages of competition would be lost.”
In the decision the courts state that “Notwithstanding our conclusion that Optum’s bid was nonconforming and its contract invalid, and that it is solely responsible for the nonconforming language in its bid, particularly in light of the proposed reservation the Division rejected during the question and answer period, the same disruption to the prescription plans which caused us to reconsider our stay of the contract prevents us from ordering Optum’s removal during the rebid.”
The decision concludes by stating “Although the absence of a stay has presumably permitted the State to secure the first-year savings in the SHBP/SEHBP the procurement promised, no savings can justify the impairment to the integrity of the bidding process caused by an irregular proceeding… Accordingly, the Division must proceed to rebid the Contract as expeditiously as possible. Whether that can occur in sufficient time to allow the Vendor to prepare for open enrollment next October is a matter we leave to the Acting Director.”
When NJEA gets a better understanding of how the New Jersey Division of Pensions and Benefits plans to implement this decision, we will share that information.
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