During the 2021 legislative session, the IFO was a leading voice in passing a bipartisan law to modernize how the state purchases prescription medications through its pharmacy benefit manager (PBM). The change enabled Minnesota to capture unprecedented savings: a total of 27% of the state’s prescription drug spend for the State Employee Group Insurance Program (SEGIP). SEGIP provides health benefits to nearly 200,000 state and local government employees. As a result, the state is projected to save more than $130 million in drug costs for public sector employees in 2023 and 2024.
The new PBM contract, awarded through the reverse auction process, created minimum savings guarantees for the state that are 23% higher than in the previous contract, ensuring significant savings. In future years, state prescription drug savings may be lowered, but the new contract terms assure that savings to the state can never be lower. In addition to the minimum savings floor, the reverse auction captured further savings through deeper discounts on prescription drug prices, lower administration fees, and other drug pricing improvements that PBMs offered the state during the competitive bidding process, concessions to the state that were incorporated into the final contract awarded to the reverse auction winner.
“Passage of the legislation was important in ensuring labor continues to have a voice in maintaining a high-quality health insurance plan at a reasonable cost,” said Pat Arseneault, IFO staff member and Labor Co-Chair of the Joint Labor Management Committee on Health Plans. “A joint committee of state employee union and management representatives worked collaboratively throughout the PBM selection process. The highly competitive and transparent nature of the reverse auction bidding procedure ensures that costs for prescription drugs and our overall health plan remain affordable for the state and its workforce.”
PBMs are middlemen corporations that manage prescription drug plans and play a major role in determining how much states, businesses, and patients pay for medicines, as well as how pharmacies are reimbursed. While PBMs were intended to help reduce costs for patients, they’ve been successful in diverting savings into profits, rather than passing those savings on to patients and taxpayers. The PBM reverse auction is a proven strategy for driving down out-of-pocket costs and holding PBMs accountable.
We're proud to have taken a leading role in pushing these reforms to increase accountability and realize dramatic savings for our members and all other state employees.