Saturday, May 19, 2007

A letter to my Representative re: HB 151

[May 19, 2007]
The Hon. Kevin Bacon
The Ohio House of Representatives
Dear Representative Bacon,
What is your position on HB 151? As a retired member of STRS, I am extremely concerned that the passage of this bill would severely damage our pension system for reasons I will list below. Please do everything you can to keep this bill from passing. Thousands of retirees will be hurt badly, financially, if it goes through.
Thank you.
Kathie Bracy
(Address, phone no.)
House Bill 151 requires the state’s five retirement systems, including STRS Ohio, to divest themselves of foreign companies doing business in Iran. This could result in an estimated $9 billion purge of foreign securities based on the bill as introduced. In addition to costs incurred from the forced sale of assets, other costs include administrative expenses incurred for the managed funds and “lost opportunity costs” on future investments. Last week, the Ohio Retirement Study Council (ORSC) recommended the Legislature reject the “As Introduced” version of H.B. 151, sponsored by Reps. Josh Mandel and Shannon Jones.

A substitute bill is being circulated that may narrow the scope of companies to oil and gas. The cost of this proposal has not yet been evaluated. It is important to note the systems have no direct investments in Iran. The proponents are referring to this bill as a goal for Ohio citizens, however, the trust fund assets of the public pensions belong to the participants, not the state.

STRS Ohio’s executive director, Damon Asbury, has testified before ORSC and the House Financial Institutions, Real Estate and Securities Committee about this system’s concerns with the bill. The three primary concerns raised with legislators are: (1) the money in the trust fund belongs to the participants — this divestiture mandate puts a foreign policy objective above the board’s fiduciary duty to invest in the sole interest of the membership; (2) there will be significant costs of complying with this mandate, costs borne by the membership and not the public; and (3) the bill sets a dangerous precedent of using trust fund money to achieve political or social agendas. Dr. Asbury’s testimony can be viewed below.

The Ohio Retirement Study Council will be holding another hearing on H.B. 151 on Tuesday, May 22 at 9 a.m. in Room 114 of the Statehouse. House Bill 151 is currently being debated by the House Financial Institutions, Real Estate and Securities Committee. The next meeting of this committee is Thursday, May 24 at 11 a.m. in Room 116 of the Statehouse. With the system spending well over a million dollars a day on health care, the losses would be devastating. Click here to see the ORSC analysis.

Damon Asbury's testimony:

House Financial Institutions, Real Estate and Securities Committee

Interested Party Testimony on House Bill 151

State Teachers Retirement System of Ohio (STRS Ohio)

May 10, 2007

Chairman Widener and members of the committee, I am Damon Asbury, executive director of the State Teachers Retirement System of Ohio. I appreciate the opportunity to present testimony today on House Bill 151. The Board and staff of STRS Ohio understand the important issue this bill is attempting to address. Like the bill’s sponsors, we strongly condemn the acts and omissions of the Government of Iran in support of international terrorism and nuclear buildup. No rational individual or organization could approve such practices. We join with you in voicing our condemnation for their actions, and we applaud you for adding your voice to those striving to expose and attempting to remedy the situation in Iran.

I also want to thank Chairman Widener, the sponsors and others on the committee who have been working with the systems to come up with potential changes to the bill as introduced. We are hopeful that we can come to an agreement which meets the intent of the sponsors while protecting the pension and health care benefits of our participants, which we as fiduciaries are charged to ensure. For this reason our testimony today is interested party. We will wait to see the substitute language that is currently in negotiation.

I thought it was important, however, to share with the full committee the three primary concerns leading to our opposition to House Bill 151 as introduced. Those concerns are the fiduciary duty of the system to the trust beneficiaries; the costs to the participants of the system; and, the dangerous precedent of putting political and social matters above investment considerations. I would like to take the next few minutes to discuss these issues with you.

The first and most important concern is the fiduciary duty of the Retirement Board and staff to the members of the system.
This isn’t just a legal or philosophical concept. The Ohio General Assembly has charged the board with one responsibility — providing retirement security for more than 400,000 current and future retired teachers, faculty and administrators. That retirement security involves lifelong pension benefits and, if financially possible, health care in retirement. For the average teacher in retirement the career employee contributions are paid out within the first two to three years after retirement. The career employer contributions are paid out within six years. For the rest of the retired teacher’s life — and we have 100 over age 100 today — the money needed to pay the promised benefits come out of investment income. Any health care benefits are dependent on investment income. Our primary duty as fiduciaries is to steward the trust funds the members have put into STRS Ohio to ensure that there is enough available to provide lifelong retirement security. This is the sole duty of any fiduciary — loyalty and prudence to the beneficiaries of the funds. Any limitations on the ability of the board to fulfill this duty can impact that future retirement security and, perhaps, ultimately fall back on the taxpayers of Ohio.

The second concern with HB 151, as introduced, is the cost and negative impact on the international investments.
Any mandated divestiture bill will entail significant costs. Those costs include the transaction cost of the forced sale of assets; the potential for loss on those sales; the cost of increased fees when forced to trade passive management for active management; and, the lost opportunity to invest in some very high performing companies or asset classes. Our international investments and alternative investments — $18.7 billion in equities - are our highest performing assets classes. In the past three years the return on international has been over 26% annually. In the bill as introduced 20–25% of those companies would be forbidden investments. In the written testimony we delivered last week we had some specific cost numbers. Since negotiations are ongoing I will refrain from estimating what the cost may be in a substitute bill. Keep in mind, however, that it is not possible to make mandated divestment cost neutral. Any cost come out of the trust funds of the participants and impact future benefits. Most of you have been involved in conversations with us about the future of retiree health care. As I talk with the members and retirees of STRS Ohio, future pension security and health care in retirement is the issue they are concerned about. Reduced investment income will impact our ability to deliver these benefits.

Finally, we are concerned this bill will result in a dangerous precedent from a public policy and investment perspective.
Since 1920, when STRS Ohio was first created through statute, there have been many changes to Section 3307 of the Ohio Revised Code. But one underlying principle has met the test of time. And that principle is that the State Teachers Retirement Board should discharge its duties with respect to the funds solely in the interest of the participants and their beneficiaries. Your predecessors saw the value of protecting these pension plan assets — which are held in trust for the members — from outside influences and persuasion. This was appropriate, this was reasonable and this was prudent. While individual investors are free to manage their own assets as they see fit, we believe attempting to achieve social or political objectives with other people’s money violates trust laws and intercedes in the fiduciary responsibilities of the board members and staff that are responsible for overseeing these assets.

We have all seen what happens when prudent person rules of investment are not followed and the far-reaching impact of such digressions from the investment process. This recognition of the importance of keeping investment decisions above the political fray, above special interests and above singular causes — no matter how noble or well intentioned — has served our members and the taxpayers’ of this state well. Over the years, the Ohio General Assembly has diligently and successfully maintained the financial integrity of the Ohio pension funds by not using them to make political or social statements. We implore you not to start now.

In conclusion, I wish to again thank Chairman Widener, the sponsors and others on the committee who are working to make this a better bill. I am hopeful we will be successful.
1. Money in the pension trust funds belongs to the MEMBERS! The divestiture mandate puts a foreign policy objective above the STRS (& others) and above the STRS Board’s fiduciary duty to invest funds in the sole best interest of the members; it indemnifies the pension board from investment decisions.

2. There will be significant costs of complying with this mandate. Costs will be borne by the members & not the citizens of Ohio (the public). Estimates of STRS’ funding period are going from 47.2 years to 79 + years…$70+ M dollars in lost revenue.

3. This bill sets a dangerous precedent of using trust fund money to address political or social agendas

[Note: If you wish, please feel free to use this letter or some version of it to write your own representative. The following link will help you find contact information]:

Iowa has seen the light..... will Ohio?

Iowa General Assembly Passes Legislation Regulating Pharmacy Benefit Managers

May 7, 2007

ALEXANDRIA, Va., May 7 /PRNewswire-USNewswire/ -- The Iowa General Assembly has unanimously passed legislation that would force pharmacy benefit managers (PBMs), the largely unregulated corporations that administer the prescription drug benefit portion of health insurance plans for employers and unions, to end their deceptive business practices and provide better safeguards for patients. A growing number of states are enacting PBM bills, such as S.F.512 in Iowa, to require these drug middlemen to disclose certain business practices that have been the subject of investigations and prosecutions. PBMs influence 80 percent of drug coverage in the United States, which is why states such as Iowa are taking steps to bring transparency to the business practices of these corporations.

PBMs receive billions of dollars in rebates from drug manufacturers in return for dispensing higher-cost brand-name drugs. The majority of those rebate savings are not passed along to their clients -- such as private health plans and the Medicare Part D program. PBMs also limit patient treatment options by offering shrinking and shifting formularies, or lists of drugs that are covered for specific groups in a health insurance plan, and by requiring burdensome pre-authorizations in order to obtain refills or formulary- restricted medications. These bureaucratic policies discourage patients from obtaining their medications.

"The National Community Pharmacists Association wants to see statutes that protect both the employers who provide drug benefits for employees and retirees, and the consumers who pay the premiums," said NCPA Executive Vice President and CEO Bruce Roberts, RPh. "The PBM reform bill passed by the Iowa General Assembly contains much-needed provisions that provide for the type of transparency and accountability that PBMs owe their customers and the public as a whole."

"Everyone in the drug delivery system is highly regulated and scrutinized, except for pharmacy benefits managers. Given the history of investigations, litigation, and prosecution of the giant PBMs; consumers and policy makers should be asking why PBMs alone should be exempt from government oversight," said Roberts. "If PBM's expect to participate in public and private prescription drug plans, they owe a fiduciary responsibility to patients and taxpayers -- not just to their shareholders.

The General Assembly's legislation requires PBMs to be certified as a third-party administrator and to disclose any conflict of interest issues. It also prohibits PBMs from substituting a medication unless it is made for medical reasons that benefit the beneficiary or result in financial savings to the employer.

The legislation gives the Insurance Commissioner the ability to adopt rules regarding timely payment of pharmacy claims and establish an adjudication process for complaints and disputes between PBMs and pharmacies.

After those initial regulatory steps are undertaken, an interim study commission will be created to assess additional disclosure, auditing, and enforcement issues.

"Iowa's new PBM regulation law offers essential protections for pharmacies, payers of health care benefits, and most importantly consumers," said Thomas Temple, executive vice president and CEO of the Iowa Pharmacy Association. "In particular, the new law provides for needed regulatory oversight of PBMs by the Insurance Commissioner's Office, standards of fairness in PBM-pharmacy contracting practices, and safeguards for consumers relative to drug substitution activity."

Temple added, "The new law also will establish a process for resolving disputes between PBMs and pharmacies and creates an Interim Legislative Study Committee to address issues related to PBM transparency. The PBM regulation bill-a major legislative priority of the Iowa Pharmacy Association-received support and endorsement from the Iowa Attorney General, organized labor, the Iowa League of Cities, the Health Buyers Alliance of Iowa, and several corporate employer groups."

The bill is currently awaiting a signature from Gov. Chet Culver.

The National Community Pharmacists Association, founded in 1898, represents the nation's community pharmacists, including the owners of more than 24,000 pharmacies. The nation's independent pharmacies, independent pharmacy franchises, and independent chains dispense nearly half of the nation's retail prescription medicines.

SOURCE National Community Pharmacists Association

Friday, May 18, 2007

May 2007 Board News from STRS

From STRS, May 18, 2007
This week, the State Teachers Retirement Board held its monthly meeting. Following the regularly scheduled meetings, a report titled "Board News" is posted on the STRS Ohio Web site, as well as mailed to a number of members and education organization representatives who have requested it. The May report follows.
At its May meeting, the State Teachers Retirement Board continued its discussion about potential health care premiums and plan design changes for calendar year 2008. The proposed changes are:
• Offer a pilot voluntary Medicare Advantage Plan option for benefit recipients and their dependents who are age 65 or older. This plan combines both traditional Medicare benefits and STRS Ohio's secondary medical coverage into one plan. A Medicare Advantage Plan could offer a lower premium, plus care management programs for the enrollees. In addition, it would simplify claims-filing for enrollees because they would not have to coordinate their coverage between Medicare and their STRS Ohio-sponsored plan. Currently, there are about 74,000 individuals who could qualify for this plan option.
• Add coverage for over-the-counter Prilosec at retail with a $5 copayment while increasing corresponding copayments for the generic and brand-name (Tiers 1, 2 and 3) prescription drugs in the same drug class (the proton pump inhibitor class of medications used to treat Gastroesophageal Reflux Disease [GERD]). Last year, about 83,000 prescriptions for drugs in this class were filled by Caremark. This change would encourage plan enrollees to move to over-the-counter Prilosec, which is the least expensive drug in this category, by reducing their out-of-pocket costs if they switch.
• Increase the Basic Plan's prescription drug maximum annual benefit to $10,000 from $5,000. With this change, a plan enrollee would pay 100% of the full cost of Tier 2 and Tier 3 drugs only after STRS Ohio has paid $10,000 in retail and mail-service prescription costs. (The Basic Plan, which offers lower premiums in exchange for higher out-of-pocket costs, is available through Aetna and Medical Mutual.) By reducing each enrollee's risk of exceeding maximum coverage, more health care program participants may enroll in this option.
• Offer a voluntary pill-splitting program for 6-15 drugs. Under this option, an enrollee, upon obtaining a prescription from his or her physician, would fill a 15-day prescription for double-strength pills that can be divided in half at home by the enrollee. In return, the enrollee would pay only half the current copayment amount.
During the discussion about plan options, staff also presented preliminary premiums for calendar year 2008. The two main drivers of health care premiums are the health status of the plan enrollees in the different risk pools (e.g., Medicare versus non-Medicare enrollees; subsidized enrollees versus non-subsidized enrollees) and the coverage that is offered through a plan. Only substantial changes to plan design/coverage levels affect premiums significantly.
Staff noted that if no plan changes are made for calendar year 2008, a 30-year benefit recipient enrolled in Medical Mutual's Plus Plan could potentially see a 15% increase, or $25 per month, in the premium. The Medical Mutual Basic Plan premium for a 30-year retiree could increase by 21%, or $19 per month. For Medicare recipients, the increases could be smaller, from 0% for a 30-year retiree enrolled in the Basic Plan to 12%, or $8 per month, for a 30-year retiree in the Plus Plan. Coverage for spouses who are enrolled in Medicare could increase 7% ($23 per month) for the Medical Mutual Plus Plan and 4% ($6 per month) for the Basic Plan. Non-Medicare spouses would potentially face higher percentage increases: 19% ($111 per month) for the Medical Mutual Plus Plan enrollees and 18% ($56 per month) for the Basic Plan.
At the June board meeting, the discussion about the health care program for calendar year 2008 will continue, including how premiums could be impacted by the implementation of these proposed plan design changes. The board also asked staff to look at several other options, such as the impact of additional promotion of the use of generic drugs. In June, the board will be asked to approve any final plan design changes for calendar year 2008. Then, in August the board will be asked to approve the 2008 premiums. These premiums will reflect the impact of any adopted plan design changes plus take into account claims data from the first six months of 2007.
As part of its discussion about the health care program, the Retirement Board also reviewed the Medicare Part B reimbursement program. Ohio statute requires STRS Ohio to pay all Medicare Part B participants a minimum reimbursement of $29.90 per month -- regardless of whether or not they are enrolled in the STRS Ohio Health Care Program. Because this is a "guaranteed" benefit, staff is recommending that this liability be fully funded and accounted for separately. The amount needed from the Health Care Stabilization Fund is estimated at $464 million plus .05% of future employer contributions. Since the current Part B reimbursement level that STRS Ohio is providing exceeds the statutory requirement of $29.90 per month, the portion of retiree reimbursement above the $29.90 would remain a liability for the Health Care Stabilization Fund. Staff also recommended that the current reimbursement dollar level for Medicare Part B be maintained for calendar year 2008. This discussion will also continue at the June board meeting.
House Bill 272, which was introduced by Rep. Michelle Schneider (R-Madiera) in fall 2005, included provisions to limit health care coverage for reemployed retirees -- regardless if their employer is public or private. This proposed change was in reaction to a continuing trend by employers to shift reemployed retirees' health care costs to the public pension plans. These provisions were removed before the bill was passed in January 2007.
Anticipating that this might occur, the State Teachers Retirement Board approved a motion in August 2006 directing staff to revise administrative rules to enable STRS Ohio to enact the same reemployed retiree health care provisions as those originally contained in H.B. 272.
The revised rules, which were approved by the Retirement Board at its May meeting, will only allow STRS Ohio to provide secondary coverage to any health care plan enrollee who is employed in a public or private position and is eligible for health care coverage through his or her employer. These provisions apply if: (1) the employer provides coverage to other employees in comparable positions; (2) the cost for the coverage is no more than the cost of coverage offered to full-time employees; and (3) the plan provides medical and prescription drug coverage. The rules apply only to individuals who are not eligible for Medicare.
The effective date of the change is Jan. 1, 2009, to allow time for current contracts to be revised for those reemployed in public positions.
The Retirement Board approved the following retirements and investment transactions:
• 121 active members were approved for service retirement; 57 inactive retirements were approved.
• In April, fixed-income purchases totaled $403 million, domestic equity purchases totaled $888 million and real estate purchases totaled $179 million.
For the last few weeks, staff has been spending a significant amount of time on House Bill 151. This bill requires the state's five retirement systems to divest themselves of foreign companies doing business in Iran, which would result in an estimated $9 billion purge of foreign securities. In addition to costs incurred from the forced sale of assets, other costs include administrative expenses incurred for the managed funds and "lost opportunity costs" on future investments. Last week, the Ohio Retirement Study Council (ORSC) recommended the Legislature reject the "As Introduced" version of H.B.151, sponsored by Reps. Josh Mandel and Shannon Jones.
Executive Director Asbury testified before ORSC and the House Financial Institutions, Real Estate and Securities Committee about this system's concerns with the bill. The three primary concerns raised with legislators are: (1) the money in the trust fund belongs to the participants -- this divestiture mandate puts a foreign policy objective above the board's fiduciary duty to invest in the sole interest of the membership; (2) there will be significant costs of complying with this mandate, costs borne by the membership and not the public; and (3) the bill sets a dangerous precedent of using trust fund money to achieve political or social agendas.
It is anticipated that a substitute bill will be introduced that narrows the scope of the legislation, but still violates the primary concerns of the pension systems. As a result, STRS Ohio still remains opposed to any mandated divestiture.
Also before the House Committee on May 17 was sponsor testimony on House Bill 152. This bill would require school boards to offer private vendor alternative retirement plans (ARPs) to new employees and those with less than five years of service credit. ARPs are currently available through 10 separate companies to full-time public college and university faculty. This bill would expand the offerings to all K-12 educators and part-time public college and university faculty. STRS Ohio will testify in opposition to this bill in the next few weeks.
STRS Ohio, OPERS and SERS staff members continue to work on selection of a pharmacy benefits manager (PBM). The Ohio State University (OSU) has officially requested to join the group. OSU was involved in early discussions in 2006 that ultimately led to the PBM request for proposals (RFP). In those earlier discussions, OSU expressed interest and support for a group purchasing approach, but chose not to join at that time. Since then, OSU has reviewed its original decision. Not only will OSU increase the market presence of the RFP, but OSU also has pharmaceutical and benefits expertise that could be beneficial to the overall project. OSU currently has more than 46,000 covered lives.
More than 3,500 STRS Ohio members completed satisfaction surveys for counseling and member education services they received during the last quarter. This represents about half of the members served. The respondents rated the counseling service a perfect 10 in 49% of the responses and the member education programs a perfect 10 in 30% of the responses. About 90% of the respondents rated overall service as outstanding. Courtesy, knowledge and professionalism continue to be the highest-rated attributes. All attributes received an outstanding rating from at least 90% of the respondents.
The STRS Ohio news e-mail list is designed solely to provide timely and accurate news and information about legislation, benefits and other issues affecting the STRS Ohio membership.
To view past news e-mails, go to
If you wish to comment on a topic, please either e-mail or call the Member Services Center toll-free at 1-888-227-7877.

Marc Dann -- the newest Sheriff in the nation? New York Times features our AG

"While Ohio is a long way from Wall Street, the state has played a major role in securities class actions. The state’s public pension funds, when combined, are the third largest in the country, after California and New York, and as a result, Ohio often ends up as the lead plaintiff in shareholder lawsuits.

Jay Eisenhofer, the Ohio pension fund’s lawyer in its case against UnitedHealth, said that Mr. Dann is taking a similar tack as Mr. Spitzer, but with a focus on changing how boardrooms handle their obligations to investors.

“I look at him as being more of an activist in the area of corporate governance,” Mr. Eisenhofer said.

When Mr. Dann took office, Ohio was already lead plaintiff in several prominent cases, one of them being the UnitedHealth Group case. Shareholders have sued the company, its board and executives in an effort to revoke the stock options that were granted to Mr. McGuire. Mr. Dann accused a special committee set up by UnitedHealth of dragging its feet in deciding whether action should be taken against Mr. McGuire."

In Search for a New Sheriff, One Stands Out
New York Times
Published: May 18, 2007

As New York attorney general, Eliot Spitzer won national attention by becoming the new sheriff in finance, taking on Wall Street and mutual funds and the insurance industry.

Kiichiro Sato/Associated Press

Marc Dann has been a vocal critic of the UnitedHealth Group and the Ohio Bureau of Workers’ Compensation.

With Mr. Spitzer now in the governor’s mansion, is there another state regulator trying to take up his badge? A strong candidate for the new Spitzer might be Marc Dann, the new attorney general of Ohio.

Since taking office in January, Mr. Dann has sharply criticized the UnitedHealth Group over its ousted former chief executive, William W. McGuire, who is accused of backdating more than $2.3 billion in stock options, and he has revived an investigation of Marsh & McLennan, looking at whether the company violated the state’s antitrust laws. He is also trying to rally other state attorneys general to join him in cases affecting investors before the Supreme Court.

Mr. Dann demurs when asked whether he is trying to emulate Mr. Spitzer. “Certainly there was a vacuum,” Mr. Dann said.

The two men spoke on the phone during the campaign, and Mr. Dann received a small check from Mr. Spitzer. “I almost framed it, and didn’t cash it,” he said.

“I never worked on Wall Street,” Mr. Dann said, “but what I do is look out my window every day and see some of the devastation that’s been reaped on the Midwest and the Rust Belt by people who are only looking out for the bottom line, sometimes to the extent of making business decisions that violate fraud laws or civil laws or even our criminal laws.”

While Ohio is a long way from Wall Street, the state has played a major role in securities class actions. The state’s public pension funds, when combined, are the third largest in the country, after California and New York, and as a result, Ohio often ends up as the lead plaintiff in shareholder lawsuits.

Jay Eisenhofer, the Ohio pension fund’s lawyer in its case against UnitedHealth, said that Mr. Dann is taking a similar tack as Mr. Spitzer, but with a focus on changing how boardrooms handle their obligations to investors.

“I look at him as being more of an activist in the area of corporate governance,” Mr. Eisenhofer said.

When Mr. Dann took office, Ohio was already lead plaintiff in several prominent cases, one of them being the UnitedHealth Group case. Shareholders have sued the company, its board and executives in an effort to revoke the stock options that were granted to Mr. McGuire. Mr. Dann accused a special committee set up by UnitedHealth of dragging its feet in deciding whether action should be taken against Mr. McGuire.

Mr. Dann traveled to Minneapolis to meet with the special committee. The committee, made up of two retired Minnesota judges, then canceled the meeting. Days later, Mr. Dann wrote a letter accusing the committee of “inexcusable arrogance.”

Before entering the Ohio Senate in 2003, Mr. Dann, 45, ran a storefront law office in a strip mall, where his general practice ran the gamut from divorces to workers’ compensation and personal bankruptcies.

“You could drive up to my law office,” he said.

In 2005, Mr. Dann made a name for himself by becoming a tenacious critic of the Ohio Bureau of Workers’ Compensation, which was then embroiled in a statewide scandal for taking $50 million in money set aside for injured workers and investing it in rare coins. Mr. Dann sued Bob Taft, the governor at the time, to demand public records relating to those investments, and he fought the case to the Ohio Supreme Court. (The court ruled for the governor, and Mr. Dann never got the documents.)

“He fought to the end,” said C. J. Prentiss, former minority leader of the state Senate, who called him a “gentle bear.” Although known as a tough fighter, he almost cried on the Senate floor while championing an anti-bullying bill for the state’s schools, telling painful stories of his chubby youth.

Many, if not most, state attorneys general aspire to become governor some day, but, at least for now, Mr. Dann does not appear to have that in his sights. “He was born to be the A.G.,” Ms. Prentiss said.

His most ambitious effort thus far has been persuading 23 state attorneys general to sign onto a brief arguing against a brief filed by the Securities and Exchange Commission in a case before the United States Supreme Court.

At issue is the interpretation of a provision of the Private Securities Litigation Reform Act of 1995. The S.E.C. is urging the court to adopt a standard that would make it harder for shareholders to prevail in fraud lawsuits against publicly traded companies and their executives. The commission argued that the litigation reform act required investors to show by evidence “a high likelihood” that the defendant possessed the intent to violate the law.

“Well, I was just enraged,” Mr. Dann said. “I want to make sure that we are out there with our amicus brief so that we can maybe shame them.

“At some point I would hope they would take a position on the side of the investors. Or stay out.”

Point: A case for state regulation of PBMs

May 17, 2007
By: Reginia Grayson Benjamin, Esq
Managed Healthcare Executive
State regulation of pharmacy benefit managers (PBMs) would benefit states and consumers by providing a regulatory framework for the only entity involved in delivery of a healthcare benefit to the consumer that is largely unregulated. Currently states regulate insurers, physicians, pharmacists, pharmacies, laboratories, third-party administrators and insurance agents. The state, primarily the insurance department, has mechanisms in place to handle and investigate consumer complaints. The departments have the authority to review records and take action against individuals and/or entities that violate the laws. However, because states do not have regulatory authority over PBMs, those safeguards are not available to consumers.
Because of a lack of regulatory oversight, the PBM industry is currently "regulated" by litigation and settlements. For example, between 2004 and 2006, nearly $378 million was paid in settlements, not including interest, by two PBMs (this is not a complete list of all settlements and litigation concerning PBMs during this time frame):
  • American Medical Security Holdings, Inc. v. Medco Health Solutions, Inc. – $5.85 million – March 2004.
  • Settlement by Consent Order with Medco and 20 state attorneys general (Arizona, California, Connecticut, Delaware, Florida, Illinois, Iowa, Louisiana, Maine, Maryland, Massachusetts, Nevada, New York, North Carolina, Oregon, Pennsylvania, Texas, Vermont, Virginia and Washington) – $28.5 million (April 2004.)
  • Gruer, et al. v. Merck-Medco (also referred to as In re Medco Health Solutions, Inc.) – $42.5 million (May 2004).
  • United States of America, et al. v. Advance PCS Inc. – $137.5 million (September 2005).
  • State Teachers Retirement System of Ohio v. Medco – $7.8 million (suit ongoing as to whether additional payment is due for punitive damages) (December 2005).
  • Settlement by Consent Order with the U.S. Justice Department with Medco –$155 million, plus interest (October 2006).
In the view of the National Community Pharmacists Assn. (NCPA), representing the nation's community pharmacists and supporting the adoption of laws to regulate PBMs, these settlement amounts are healthcare dollars. Those dollars should have been spent to provide healthcare to patients and lower the cost of the prescription drug benefit for employers and patients. The investigations and the resulting lawsuits take years to be completed and once resolved, their overall value to the patient and employers is oftentimes limited.
Most of the attorneys generals in the 20-state investigation of PBMs, had to rely on their state consumer protection laws or deceptive practice acts for their authority. States do not have a mechanism in place to handle consumer complaints about PBMs and consequently patients and pharmacists on their behalf are primarily left on their own to try to resolve their issues with PBMs.
The consent order with the attorneys general addressed the issue of switching consumer's prescriptions and required extensive procedures before switching can occur including the need to obtain approval of the prescriber. According to South Dakota Attorney General Larry Long (R), Medco switched patients from certain cholesterol-lowering medications to another drug that required patients to receive follow-up blood tests at additional costs to the patient.
The other major component of the Consent Order was to require transparency and disclosure of revenue streams received by the PBMs from manufacturers. Many PBM customers are unaware of the magnitude of revenue received by the PBMs from manufacturers and the attorneys general believed that customers have the right to that information.
NCPA believes that PBMs can play an important role in performing the administrative tasks associated with prescription drug programs; however, NCPA is concerned when PBMs engage in activities that can be characterized as the "practice of pharmacy" without the benefit of regulatory oversight. Some of those activities include drug utilization review, formulary management, interaction screening and therapeutic substitutions. Another area of major concern is the ability of PBMs to self-refer to their own wholly owned mail-order facilities without any government oversight. The mail-order operations are the source of increasing patient complaints.
The National Legislative Association on Prescription Drug Prices (NLARX) is a nonpartisan organization of state legislators that works jointly across state lines to reduce prescription drug prices and expand access. In addition to NLARX, AARP, the National Mental Health Assn., NCPA and many state pharmacy associations have worked to educate legislators, company benefits managers, labor unions, and other purchasers about PBMs.
Two NLARX members sponsored laws enacted in Maine and the District of Columbia to regulate PBMs. Those laws are the most stringent, to date, and have survived numerous court challenges by the PBM industry. Other members of NLARX have sponsored similar legislation in their states. Eight states (Georgia, Kansas, Maine, Maryland, Mississippi, North Dakota, Rhode Island, and South Dakota) and the District of Columbia have enacted laws that attempt to provide some regulatory oversight of certain PBM business practices.
Over the last several years while PBMs have been "managing" the prescription drug benefit, the cost of that benefit has continued to outpace all other healthcare benefit spending and patient copayments and deductibles continue to increase. Yet in a recent article, it was reported that the CEO of the largest PBM received $8.9 million in compensation in 2006.
Regulatory oversight that would require:
  • Licensure or registration for PBMs and authorization for review by a regulatory body.
  • Some form of transparency and disclosure.
  • Guidelines for substitutions of prescriptions including the requirement that the prescriber must authorize the substitution.
  • A consumer complaint mechanism.
  • Guidelines for referrals to wholly owned mail-order facilities.
Transparency and disclosure has resulted in many customers making better-informed decisions and saving healthcare dollars. NCPA supports and the courts have upheld the right of states to regulate PBMs.
Reginia Grayson Benjamin, Esq., is director, government affairs (state) for the National Community Pharmacists Assn.

Agenda and schedule for May, 2007 STRS Board meeting

May 10, 2007
The State Teachers Retirement Board and Committee meetings currently scheduled at the STRS Ohio offices, 275 East Broad Street, Columbus, Ohio 43215, are as follows:
Wednesday, May 16, 2007
...11:00 a.m. Disability Review Panel (Executive Session), followed by
....................Final Average Salary Committee (Executive Session)
Thursday, May 17, 2007
...8:30 a.m. Special Health Care Committee
...9:30 a.m. Retirement Board Meeting
Friday, May 18, 2007
...9:00 a.m. Resumption of the Retirement Board Meeting, followed by
..................Ad Hoc Committee to Review Webcasting
A Special Health Care Committee meeting will begin at 8:30 a.m. on Thursday, May 17, in the Sublett Room on the second floor. The Retirement Board meeting will follow at 9:30 a.m. (Board Room). The Board is expected to receive a report from the Member Benefits Department regarding health care, the Executive Director's Report (1 p.m.), followed by public participation and a report from the Member Benefits Department regarding pension benefits. The Retirement Board meeting will resume at 9 a.m. on Friday, May 18. The Board will receive reports from the Investment Department, Finance Department and review Board Policies. The Board will address routine matters and any other topics that may require its attention. A meeting of the Ad Hoc Committee to Review Webcasting is expected Friday afternoon when the Retirement Board meeting adjourns.
STRS Board meeting: May 17-18, 2007
Some highlights for this month's STRS Board meeting:
  • John Lazares hopes to be back
  • 2008 Health Care plans will be presented by the STRS senior staff, with fine-tuning to be done in June and finalized in August.
CORE meeting: Thursday, May 17, 2007
11:45 a.m., STRS building, second floor, cafeteria room behind the Sublett Room
Map/directions to STRS, 275 E. Broad St. Columbus, OH 43215

CORE meetings are open to all educators. There are no dues as such, but donations are welcome and appreciated.

Thursday, May 17, 2007

Are you a Buckeye with diabetes? Prepare to be dumped on -- or move to one of the other 46 states!

On March 6, for the first time in 17 years, the state's top executive, Gov. Ted Strickland, endorsed the passage of the Ohio Diabetes Cost Reduction Act. Unfortunately, when the bill got to the Senate, it was turned down by the Senate Insurance, Commerce and Labor Committee, led by Sen. Steve Stivers, R-Upper Arlington.
Health insurance ought to cover diabetes
Thursday, May 17, 2007
Columbus Dispatch
In a state facing a disease of epidemic proportions, why isn't diabetes covered on state-regulated health insurance?

Imagine that, like many others, you're diagnosed with diabetes. You ask your doctor whether there is a cure. What is the next step? The doctor refers you to a professional to help you manage your changed lifestyle and inform you of the consequences of not embracing these changes.

You immediately call to make an appointment to see the specialist, only to find out that your insurance doesn't cover the $400 cost of the vital visit.

You know you need to go, so you find the money to pay for the visit. The specialist now tells you that you will need testing supplies and equipment to monitor your condition.

Right away you go to the pharmacy to pick up your prescription to learn that it is not covered either.

The Diabetes Cost Reduction Act would make it mandatory for diabetes to be covered on state-regulated health insurance.

Ohio is one of only four states that has yet to pass this bill despite the classification of diabetes as an epidemic by the Centers for Disease Control and Prevention. More than 20.8 million Americans are living with diabetes, including 1 million Ohioans.

On March 6, for the first time in 17 years, the state's top executive, Gov. Ted Strickland, endorsed the passage of the Ohio Diabetes Cost Reduction Act. Unfortunately, when the bill got to the Senate, it was turned down by the Senate Insurance, Commerce and Labor Committee, led by Sen. Steve Stivers, R-Upper Arlington.

I encourage the 380,000 people affected by this legislation to become involved in the passing of this important law. Call the American Diabetes Association at 1-800-DIABETES to prevent Ohio from becoming the last state without this vital insurance regulation.

Executive director,
Central Ohio chapter of the American Diabetes Association Columbus

Contact your state representative TODAY

From John Curry, May 17, 2007
Subject: ***CORE ALERT*** 5/17/07 House Bills 151 & 152
Dave Parshall, CORE President, has issued a sample letter (below) that you may use (or modify) to send to your local Ohio House Representative in regards to two Ohio House bills that will cause serious harm to our State Teachers Retirement System of Ohio. CORE urges you to write to your local Representative and ask him/her to not align themselves with either of these bills - House Bill 151 and House Bill 152. Contact email and mailing addresses can be accessed by clicking here
May 17, 2007
The Honorable Representative
I am writing in regards to H.B. 152 (formerly H.B. 700) and H.B. 151. Both of these recently introduced bills will do great harm to the State Teachers Retirement System and the thousands of current and future retirees that depend on STRS for their survival.
H.B. 152 would force Ohio’s school boards to offer teachers with five years or less service an Alternative Retirement plan separate from STRS. This would mean about 15,000 or more teachers would not be contributing to STRS. This would adversely affect current and future retired teachers who depend on STRS for their pensions and healthcare. The unfunded liability of STRS is already great and needs to be reduced not increased. The negative impact of this legislation is far reaching for all concerned. Do not play politics with the lives of so many retired hard working public educators. Ohio needs to continue to live up to the promise made to Ohio’s educators for so many decades not withdraw from it.
H.B. 151 sounds harmless enough and may appear patriotic. The reality is something different. It would be all but impossible to determine which foreign companies are in fact doing business with Iran. Halliburton a U.S. company is doing business with Iran through subsidiaries in Europe. This was disclosed via their own testimony two weeks ago in Congress. Consequently, it’s not clear that U.S. companies are not doing business with Iran through the back door, so how would pension systems like STRS determine which company to divest? The harm that would be done to Ohio’s pension systems like STRS would be immeasurable.
STRS has heavily invested in foreign markets since Enron. The system would suffer great financial harm, which would translate to reduction in benefits. STRS already has an unfunded liability of at least 47.5 years and a major healthcare problem. The sponsors of this legislation, mainly Republicans, are trying to win political points and look like they are being strong on Islamic terrorism. The truth is the main effect will be to harm the lives of the thousands upon thousands of Ohio’s public retirees. This bill is just another attempt to not face the diplomatic failure of the Bush Administration. We need direct talks with Iran, not legislation that looks good, but which will have little effect on Iran. I urge you to not support H.B. 152 and H.B. 151. Short term political gain that harms thousands of seniors is not what Ohio needs.
Yours truly,

Hazel Sidaway and STRS: A flashback

From the STRS flashback (Hazel Sidaway) from one year ago!

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Tuesday, May 15, 2007

Our national disgrace: US healthcare

From John Curry, May 15, 2007
Subject: What a disgrace! U.S. Healthcare

The U.S. Flag upside down? What a disgrace.... yet, an equal disgrace can be found in the article below comparing U.S. healthcare quality to that of five other "industrialized" countries. The article DOESN'T touch on the cause of our last place finish.... so, I will. The common denominator of the reasons for our last place finish is a five letter word - GREED!
Greed by the pharmaceutical manufacturers who use our tax monies through the National Institutes of Health to develop their medicines in our public universities - medicines which are then shipped to other countries of the world and sold at a far smaller price than to the people who assisted in paying for the development of these miracle drugs....our very own citizens. They then find it in their best interest to buy-off any other pharmaceutical company shortly before their patent runs out on a best-seller Rx so that the drug won't find its way to market as a more affordable generic manufactured by another pharmaceutical company. What a great way to make some bucks....get paid to not manufacture a product!
Greed by the pharmacy benefits managers who backdate stock options of their CEO's at investors' expense, manipulate the "average wholesale price (AWP)," receive kickbacks from the pharmaceutical manufacturers without passing these kickbacks on, short the pill counts in patients' orders, switch prescriptions without the consent of the patients, and then get slapped on the wrist with out-of-court settlements that they factor in as just the cost of doing business. They can practice much of this (minus the sunshine in state sunshine laws) under guise and blessing of a concept in federal law known as "trade secrets." A quick visit back in history to the recent Ohio STRS settlement with a PBM in a Cincinnati court room should leave no doubt about some of these practices - kinda' close to home, huh?
Greed by the U.S. insurance industry whose "administrative fees" sometimes exceed 20% of the monies on the paperwork they shuffle for the companies and organizations (like state retirement systems) who pay them to do their creative bookkeeping. They supplement this by going out of their way finding reasons to weasel-out of paying medical claims knowing that the elderly and infirmed will not have the means or the will to contest the refusals to pay these very same claims.
Greed by many hospitals in this country who don't even blink an eye when they charge two dollars for an aspirin while at the same time fight to hold on to their "non-profit" status. Meanwhile, they find it in their best interest to charge double and triple the going hospitalization rate to those in our country who cannot afford health care insurance.
Greed to the medical suppliers who profiteer at the expense of those who badly need their products while at the same time making a sport of overbilling Medicare and risking a slap on the wrist.
The U.S. also has the lowest rate of incarceration of those unscrupulous executives of the above entities who are finally caught with their hands in the cookie jar....and so, they continue to ply their trade with almost unlimited immunity from our system of justice.
One thing we in the U.S. definitely can brag about.... we have some of the best politicians that corporate healthcare money can buy! Many of them return the campaign donation favors to the healthcare industry each and every time they show to vote in the U.S. House and Senate. This disgrace could be changed with the concept of universal healthcare but.... it would mean a few less BMW's in the garages of those who administer our healthcare.... wouldn't it?
U.S. healthcare expensive, inefficient: report

By Maggie Fox, Health and Science Editor

Tue May 15, 2007

Americans get the poorest health care and yet pay the most compared to five other rich countries, according to a report released on Tuesday.

Germany, Britain, Australia and Canada all provide better care for less money, the Commonwealth Fund report found.

"The U.S. health care system ranks last compared with five other nations on measures of quality, access, efficiency, equity, and outcomes," the non-profit group which studies health care issues said in a statement.

Canada rates second worst out of the five overall. Germany scored highest, followed by Britain, Australia and New Zealand.

"The United States is not getting value for the money that is spent on health care," Commonwealth Fund president Karen Davis said in a telephone interview.

The group has consistently found that the United States, the only one of the six nations that does not provide universal health care, scores more poorly than the others on many measures of health care.

Congress, President George W. Bush, many employers and insurers have all agreed in recent months to overhaul the U.S. health care system -- an uncoordinated conglomeration of employer-funded care, private health insurance and government programs.

The current system leaves about 45 million people with no insurance at all, according to U.S. government estimates from 2005, and many studies have shown most of these people do not receive preventive services that not only keep them healthier, but reduce long-term costs.

Davis said the fund's researchers looked at hard data for the report.

"It is pretty indisputable that we spend twice what other countries spend on average," she said.

Per capita health spending in the United States in 2004 was $6,102, twice that of Germany, which spent $3,005. Canada spent $3,165, New Zealand $2,083 and Australia $2,876, while Britain spent $2,546 per person.


"We focus primarily on measures that are sensitive to medical care making a difference -- infant mortality and healthy lives at age 60," Davis said. "Those are pretty key measures, like how long you live and whether you are going to die before age 75."

Measures of other aspects of care such as cataract surgery or hip replacements is harder to come by, she said.

They also looked at convenience and again found the United States lacking -- with a few exceptions.

"We include measures such as waiting more than four months for elective, non-emergency surgery. The United States doesn't do as well as Germany but it does a lot better than the other countries on waiting time for surgery," Davis said.

"We looked at the time it takes to get in to see your own doctor ... (or) once you go to the emergency room do you sit there for more than two hours, and truthfully, we don't do well on those measures," Davis said.

According to the report, 61 percent of U.S. patients said it was somewhat or very difficult to get care on nights or weekends, compared with 25 percent to 59 percent in other countries.

"The area where the U.S. health care system performs best is preventive care, an area that has been monitored closely for over a decade by managed care plans," the report reads.

The United States had the fewest patients -- 84 percent -- reporting that they have a regular doctor.

And U.S. doctors are the least wired, with the lowest percentage using electronic medical records or receiving electronic updates on recommended treatments.

"I disapprove of what you say, but I will defend to the death your right to say it."
~ Attributed to Voltaire (François Marie Arouet, 1694-1778), French philosopher, author.

Monday, May 14, 2007

A former Woodridge student in the legislature opposing HB 152

From Lloyd Knudsen, May 14, 2007
Subject: Fw: House Bill 152

Core members,
One of my fellow teachers from Woodridge (John Kane) sent this message about HB 152 to Kevin Coughlin. Kevin is a former Woodridge student. I don't think we have to worry about it passing.
Lloyd Knudsen
Kevin Coughlin to John Kane, May 14, 2007
Subject: RE: House Bill 152
Mr. Kane,
Thanks for the email. If HB 152 passes the House, it will come before the committee I chair in the Senate. I will not support a bill that compromises the integrity of the pension system.
Last session, there was an attempt made to amend this bill into another one at the last minute. I did not sign off on it and the effort did not succeed. In addition, I do not believe that the Ohio Retirement Study Committee has done an analysis on the bill yet.
Good to hear from you,
Kevin Coughlin
John Kane to Kevin Coughlin, May 10, 2007

Subject: House Bill 152

Kevin: Please do what you can to help your retired teachers out to stop this particular piece of legislation which would clearly negatively impact the retired teachers in Ohio. Why are they just targeting STRS and SERS and not the public pension funds in Ohio. Thanks in advance for your effort to look out for your supporters from Woodridge.
[John Kane]

Sunday, May 13, 2007

Duke Snider and Jeff Chapman re: Priorities

From Duke Snider, May 5, 2007
Subject: Re: Trio
Jeff, Thanks for the courteous reply. I'm also a board member (Brown County Educational Service Center). I want to make the best decisions which will be most beneficial to enhance the education for the children, parents, and educators in Brown County.
As far as my top priority, I place the children there. When deciding one's priority, a person has choices. Sometimes there are good and bad choices when prioritizing. I chose not to attend the 2007 OSBA convention in California, due to my beliefs in spending money. I felt with the condition of the financial situation of schools, I didn't think this was a wise decision. Does a person really absorb enough information and place it into action to justify the expense?
Furthermore, I believe some individuals view trips as vacations. For example, a school board member attended a conference, and he was asked about it. His reply was "The guy juggling chain saws was really good." I am very pro teachers, secretaries, aides, custodians, and bus drivers, because these people know and work with our children more than many parents. As far as administrators, there have been a complete change as compared to many years ago. It seems many are more interested in perks and their salaries.
Don't misunderstand me, because there are some who are dedicated. I don't want to ramble, but I find it extremely difficult to understand why STRS employees are treated better than retirees. It seems to me people go out of their way to rationalize why they (employees) are so deserving yet when retirees only want to be treated fairly, well that's a different story. Do STRS board members really think it's fair to give retirees the 3% cola based on the year they retired?
I retired in 1998 and my 3% is based on 1998. Now is that really fair? Yet, employees can be given bonuses for basically doing a job they are being paid to do. Now is that really fair? I guess the reason retirees really like Dennis and John is due to the fact that both really care for retirees. They understand retirees have dedicated their lives to education. They understand i.e. the sky rocketing cost of buying gasoline which creates a domino effect that increases other costs to live. They understand a person who receives an inflated salary does not care if gas is $1.50 or $5.00 a gallon, because they can afford it.
You weren't on the board when this happened, but when the 13th check was discontinued, an elderly lady was interviewed on television. She was asked what she would do without her 13th check. Her reply was,"I bought my orthopedic shoes with it, but now that it's gone, I'll have to do without them." That's sad, which is probably one of thousands of sad stories.
Jeff, I want to apologize for being so wordy, but now maybe you'll have a better understanding of how and why I feel the way I do. It's not just for me. I want all retirees to be able to have an enjoyable retirement, and not have to worry. I have confidence in you that you'll view your priorities in a different light and become one of three.
Do you really think Damon places retirees as his top priority? What about his promise to make the child care center cost neutral by (I'm not sure, but I think it was about two years ago). Do you really think he and some of the STRS board members really CARE? Again, thanks for taking the time to respond.
Duke Snider
From Jeff Chapman, May 5, 2007
Subject: RE: Trio
Thanks very much, Duke, for your good thoughts. I agree with all you said, but the trick is deciding which choices are (or will be) best for our retirees. Just as an example, the Medicare subsidy decision was not popular because it adversely affected our oldest retirees. But I was convinced that keeping the subsidy at the 2006 level would mean further erosion of our Health Care Stabilization Fund and lead to benefit cuts and/or premium increases for all retirees. Tough call... I want to thank you in particular for your comment regarding retirees in rural, economically challenged areas of Ohio. Many of the retirees I interact with the most - those here in Northeast Ohio - are often better off financially than their peers in other parts of the state due, in part, to higher salaries during thier careers. I take to heart your point and hope to always remember. I respect your opinion and hope you'll continue to "weigh-in" often.
Thanks again,
Jeff Chapman
From Duke Snider, May 4, 2007
Subject: Fw: Trio
Mr. Chapman, I'm not sure I received a reply from you due to a computer problem, however, I did want to say I had a typo (ignore). Oh heck, it wasn't the computer's fault, it was mine. I should have checked my email closer before I sent it
From Duke Snider, May 2, 2007
Subject: Trio
Mr. Chapman, It's a shame STRS doesn't have retirees at the top of their list. It seems as if there is no limit on spending for anything wanted in Columbus, ie building, art, raises, travel, parties and on and on, BUT when it comes to retirees it seems as if things such as health insurance, 3% simple and not compound based on year retired, vision, dental, etc. doesn't rate as top priorities when making decisions affecting retirees. It's difficult to understand the rationalizations, but I guess it's due to the fact retirees are basically rated as second class and STRS staff and employees are the top priority. Why not try to reduce health care premiums and have the best health care coverage there is? With the huge number of retirees STRS should be in the driver's seat when dealing with health care companies. Giving huge bonuses, raises is no problem for STRS, except when considering retirees cola or having them pay more for medicare and health insurance. Why rubber stamp decisions for employees, and ignore retirees needs? I'm not blaming you and I appreciate you voting with Dennis. Dennis and John are two whom retirees admire depend on, because they care about retirees. I believe we can finally add you to the list, making a trio of those who really care about retirees. Just one suggestion, talk with retirees who live in some poor sections of Ohio and find out how they live. You'll heard some sad, sad stories which will bring tears to your eyes.

Dispatch editorial: Hands off pensions

Ohio lawmakers should leave foreign policy to the federal government
Columbus Dispatch
Sunday, May 13, 2007
Larry KehresMount Union Collge
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