Shirlee Zerkel: Thank you Ms. Ramser
Subject: Thank you Ms. Ramser
A forum for Ohio educators interested in bringing needed reform to our pension system (STRS Ohio). John Curry (strswatchdog@yahoo.com) researches many issues related to STRS Ohio and contributes them to this blog. Contributions from others are welcome, and may be sent to Kathie Bracy (kbb47@aol.com).
Attorney General Jim Petro sued New Jersey-based Medco Health Solutions on Monday in Hamilton County Common Pleas Court. The lawsuit contends Medco kept $8.30 per prescription since 1988 that should have gone to the pension fund.
Petro said the company “maliciously demonstrated a complete lack of care and conscious disregard for the rights of STRS Ohio. The corporate culture of Medco encouraged profit above service.”
Three other state pension funds – Ohio Public Employees Retirement System, Ohio School Employees Retirement System and Highway Patrol Retirement System – use Medco as their pharmacy benefit manager.
Kim Norris, a spokeswoman for Petro, recommended they look closely at Medco’s service.
“The allegations are a rehash of what we’ve seen before,” said David Machlowitz, general counsel and secretary of Medco. “We believe the allegations lack merit.”
Medco faces a federal lawsuit filed in Philadelphia in September accusing it of violating federal false claims laws. The company asked a federal judge in that case on Friday to dismiss the suit.
STRS ended its contract with Medco in 2001 when it switched to AdvancePCS Health of Alabama. The change was the result of a competitive bid process and not related to the case, said Laura Ecklar, a spokeswoman for STRS.
The suit claims Medco, which has 3,600 Ohio employees, violated Ohio’s Consumer Sales Practices and Deceptive Trade Practices acts, unjustly enriched itself at the expense of STRS, and defrauded the system and its retirees.
“We have very high performance standards for the vendors we contract with,” said Damon Asbury, interim executive director of STRS. “The audit procedures we have in place to review performance helped to uncover some of the abuses.”
Ecklar said the federal and state cases are similar, but the Ohio case is the result of an internal investigation by STRS. That investigation showed Medco overcharged STRS more in mail-order dispensing fees. The overcharges were hidden in reduced rebate payments to STRS.
The STRS audit also showed that Medco charged one-third more for generic drugs filled by mail order than retail pharmacies were charging for the same drugs. Asbury said STRS believes Medco kept the cost difference rather than give it to STRS.
Rebates from pharmacy benefit managers help fund health care benefits for STRS members. Ecklar said any recovery from the suit will be put in the system’s Health Care Stabilization Fund.
Retired teachers reported to STRS that Medco under-counted pills on a regular basis.
Machlowitz said surveys of STRS and the other pension funds show a high level of consumer satisfaction.
“Medco Health prides itself on its integrity,” he said. “We believe we have abided by the letter and spirit of all applicable laws.”
Petro’s complaint alleges Medco employees falsified prescription orders to appear to meet contractual performance guarantees by deleting prescriptions and re-entering them with a different date. That delayed getting prescriptions to STRS members.
The complaint also alleges Medco engaged in the illegal practice of using non-pharmacist personnel to dispense or cancel patient prescriptions without the required review by a licensed pharmacist.
Machlowitz said Medco’s pharmacy practices are inspected regularly by the Ohio State Board of Pharmacy as well as boards in other states.
The federal case accuses the company of altering records to avoid having to pay penalties on late deliveries. It said the company failed to follow laws requiring consultations with doctors about certain prescriptions. It also said Medco pressured doctors to switch patients to drugs made by Medco’s former owner, pharmaceutical giant Merck & Co.
In still other lawsuits, a New Jersey judge dismissed two cases where Medco was accused of making inappropriate claims for co-payments for a particular prescription drug.
A pharmacy benefit manager acts on behalf of employers, including state agencies, pension systems, insurance companies and other health care payers, to get discounts by negotiating prices with drug companies.
Petro hired the law firm of Waite, Schneider, Bayless & Chesley in Cincinnati as special counsel for the suit. Norris said filing the case in Cincinnati was a legal strategy because Petro believes the suit has a better chance at success there. The case could have been filed in any Ohio county.
"Medco says that after overhead its profit margin on mail-order generic drugs for the retired Ohio teachers was only 23 percent and its total margin, after losses on brand-name drugs, was 1 percent."
In other words, the Big 3 Pharmacy Benefit Managers - Medco, Express Scripts (ESRX) and Caremark (CMX) - have been cross subsidizing low to nil margins on mail order brands, and no general management fees, with high margins on mail order generics.
Furthermore, the Big 3 PBMs basically set the price of their retail competitors -- Walgreen (WAG) and CVS (CVS) -- an example of conflict of interest and self-dealing if there ever was one.
Wal-Mart (and for that matter Costco) know of this cross-subsidy and do not need high margin generics to cross-subsidize other lines (eg. mail order brands for PBMs and the front store operations of WAG and CVS).
The pressure for better prices on generics will come from plan sponsors that contract out to PBMs -- the United Healthcare (UNH), the Blues, Principal, Humana, GM, Ford, IBM, Medicare, Medicaid.
This will force PBMs to respond by reducing their margins on mail order generics, will force WAG-CVS to do likewise at retail, and to make up the shortfall with higher prices elsewhere (management fees, mail order brand margins for PBMs, and front store margins for WAG and CVS)
That is the connection between the Wal-Mart (WMT) announcement and its effect on stock prices of other drug supply chainers.
American Express
Board Member Activity
Charges Posted
(Headings for items listed below: Board Member; Item(s) Purchased; Business Purpose; Amount)
January 2004
Norris; Transportation; Board Retreat Meetings; 26.78
Puckett; Membership; Credit Card access; 35.00
Scott; Meal; Committee & Board Meetings; 36.34
February 2004
Norris; Membership; Credit Card access; 35.00
Puckett; Conference registration; IFEB – Retirement Plan Basics/Choice Based Benefits 1,550.00
Puckett; Conference meals; IFEB – Retirement Plan Basics/Choice Based Benefits; 222.91
Puckett; Conference lodging; IFEB – Retirement Plan Basics/Choice Based Benefits; 859.94
Scott; Meals; Committee & Board Meetings; 58.93
March 2004
Jack Chapman; Newspaper subscription; NY Times Quarterly Subscription; 63.70
Scott; Meal; Committee & Board Meetings; 13.58
April 2004
Norris; Conference Registration;
Norris; Conference lodging; Chicago Health & Welfare Plan Management; 963.07
Norris; Meal; Business Dinner; 40.32
Norris; Meal; Representing STRS @ OEA Rep Assembly; 45.88
Scott; Meal; Representing STRS @ OEA Rep Assembly; 41.64
May 2004
Norris; Conference registration; Cancelled – Chicago Health & Welfare Plan Management; (945.00)
Norris; Conference lodging; Cancelled – Chicago Health & Welfare Plan Management; (938.07)
Puckett; Conference registration; IFEBP – Financial & Investment Planning Basics; 1,550.00
Scott; Meals; Committee & Board Meetings; 92.00
Scott; Lodging; Healthcare Roundtable Discussion; 166.00
Scott; Meal; Healthcare Roundtable Discussion; 10.00
June 2004
Jack Chapman; Newspaper subscription; NY Times Quarterly Subscription; 63.70
Norris; Meal; Business Lunch; 15.25
Scott; Meals; Committee & Board Meetings; 83.40
July 2004
Norris; Meals; Chicago – D.C.; 224.28
Norris; Lodging; Chicago – D.C.; 341.46
Norris; Transportation; Chicago – D.C.; 394.18
Scott; Membership; Credit Card access; 55.00
August 2004
Jack Chapman; Newspaper subscription; NY Times Quarterly Subscription – Cancelled; (50.20)
Puckett; Conference meals; IFEBP – Financial & Investment Planning Basics; 175.29
Puckett; Lodging; IFEBP – Financial & Investment Planning Basics; 633.17
Scott; Meals; Committee & Board Meetings; 58.00
September 2004
Scott; Meal; Committee & Board Meetings; 25.00
October 2004
Billirakis; Membership; Credit Card access; 55.00
Puckett; Conference meals; Opal Financial Conference; 146.19
Puckett; Lodging; Opal Financial Conference; 807.86
Scott; Meals; Committee & Board Meetings; 35.00
November 2004
Billirakis; Airfare; Committee & Board Meetings; 183.20
Puckett; Lodging deposit; IFEBP Certificate Series – Employee Benefits; 228.58
Scott; Meals; Committee & Board Meetings; 39.35
December 2004
Puckett; Conference registration; IFEBP – Employee Pensions Conference – Part I & II; 1,590.00
Scott; Meals; Committee & Board Meetings OEA-RA; 83.74
January 2005
Puckett; Membership; Credit Card access; 55.00
Scott; Meal; Committee & Board Meetings; 13.00
February 2005
Puckett; Conference meal; IFEBP Certificate Series – Employee Benefits; 43.29
Puckett; Conference lodging; IFEBP Certificate Series – Employee Benefits; 914.32
Scott; Meal; Committee & Board Meetings / FRC Seminar; 20.74
March 2005
Puckett; Conference meals; IFEBP Certificate Series – Employee Benefits; 146.64
Puckett; Phone; IFEBP Certificate Series – Employee Benefits; 25.97
Scott; Meals; Committee & Board Meetings; 40.00
April 2005
Scott; Meal; Presenting STRS reports @SWOEA; 14.58
May 2005
Scott; Meals; Presenting STRS reports @ SWOEA; 72.20
Scott; Meals; Committee & Board Meetings; 55.64
June 2005
Ramser; Membership; Credit Card access; 55.00
Scott; Meals; Committee & Board Meetings; 84.94
July 2005
Ramser; Conference lodging; CAPPPs & Benefits Conference; 588.28
Scott; Membership; Credit Card access; 55.00
September 2005
Puckett; Conference meals; IFEBP – Employee Health – Part I & II; 92.03
Puckett; Parking; IFEBP – Employee Health – Part I & II; 125.00
Ramser; Transportation; CAPPP’s II – Health; 48.00
Scott; Membership; Cancelled – Credit Card access; (55.00)
October 2005
Puckett; Conference meal; IFEBP – Employee Health – Part I & II; 34.80
Puckett; Conference lodging; IFEBP – Employee Health – Part I & II; 952.05
Ramser; Conference lodging; CAPPP’s II – Health; 515.85
November 2005
Billirakis; Membership; Credit Card access; 55.00
January 2006
Jeff Chapman; Membership; Credit Card access; 55.00
Flannagan; Membership; Credit Card access; 55.00
Puckett; Membership; Credit Card access; 55.00
March 2006
Jeff Chapman; Meals; Committee & Board Meetings; 36.79
Jeff Chapman; Conference lodging; Int’l Foundation CAPPP Pension & Benefits Conf; 792.90
Jeff Chapman; Conference meals/Internet access; Int’l Foundation CAPPP Pension & Benefits Conf; 159.94
Jeff Chapman; Parking; Int’l Foundation CAPPP Pension & Benefits Conf; 48.00
Flannagan; Conference Lodging; Int’l Conference – Public Pension & Employee Benefits; 792.90
Flannagan; Conference meals; Int’l Conference – Public Pension & Employee Benefits; 66.70
April 2006
Jeff Chapman; Meal; Committee & Board Meetings; 13.43
Puckett; Conference meals; IFEBP – Int’l Foundation Basic Compensation Conference; 144.11
Puckett; Conference lodging; IFEBP – Int’l Foundation Basic Compensation Conference; 785.89
Puckett; Parking; IFEBP – Int’l Foundation Basic Compensation Conference; 75.85
May 2006
Jeff Chapman; Meals; Committee & Board Meetings; 63.52
Ramser; Membership; Credit Card access; 55.00
June 2006
July 2006
Ramser; Conference registration; Nat’l Council on Teacher Retirement; 600.00
August 2006
Ramser; Conference registration – cancelled; Nat’l Council on Teacher Retirement; (600.00)
(September 2006 and October 2006 figures were not included in this report, as indicated in the heading.)
Night Before STRS Christmas 2003
“T'was the night before Christmas, when all through the STRS house Not a creature was stirring, not even a louse; The stockings were hung by the chimney with care; In hopes that more bonuses soon would be there; The board members were all nestled snug in their beds, While visions of more entitlements danced in their heads; And Betty in her ‘kerchief, and Jimmy in his cap, Had just settled their brains for a long winter’s nap, When out on the lawn there arose such a clatter, Jimmy sprang from the bed to see what was the matter. Away to the window he flew like a flash, Tore open the shutters while stumbling over cash. The moon on the breast of the new-fallen snow Gave luster of mid-day to the “bennies” below, When, what to his wondering eyes should appear, But a miniature bank account, and eight tiny reindeer, With a little old driver, so lively and quick, I knew in a moment it must be Gov. Dick.
More rapid than eagles his spenders they came, And he whistled, and shouted, and called them by name; ‘Now Michael! Now, Jackie! Now Debbie and Gene! On, Joey! On Hazel!, on Herbie and Stephen! Now spend away! Spend away! Spend away all! As plastic credit cards that before the wild investigation fly, When they meet with a question, maybe they lie; So up to the Palace (95 mil.) the spenders they flew, With a bank account of full of money, and Gov. Dick, too. And then, in a twinkling, he heard on the roof The spending and traveling of each little goof. As he drew in his head, and was turning around, Down the chimney Gov. Dick came with a bound, He was dressed in OEA garb, from his head to his foot, And his clothes were all garnished with airline tickets and soot. A bundle of bennies he had flung on his back, And he looked like a bureaucrat, all dressed in his black. His eyes-how they twinkled! His vetoes how merry! His promises were like hollow, any investigation he would bury! His droll little mouth was drawn up like a bow, His control over the Ethics Commission we’ll all never know! The stump of a subpoena he held in his teeth, And the smoke it encircled his head like a wreath;
He had a poker face and a little round belly, That shook when he governed, like a bowl full of jelly. He was chubby and plump, all clever and shrewd, And just removed enough to stay away from the feud.
A wink in his eye and the ink in his pen, Would insure that the retirees' plight wouldn’t end. He spoke not a word, but went straight to his work, He controlled his legislative puppets, just like a jerk, He sprang to his sleigh, to his cronies he gave a whistle, And they all flew away like down on a thistle. But I heard him exclaim, ‘ere he drove out of sight, “I’ve got to stop in San Francisco before the end of the night. Merry Christmas retirees, I love you! -- And-Happy New Year!” |
Larry Kehres | Mount Union Collge Division III |