EUTF’s drug plan transition is delayed

The Hawaii Employer-Union Health Benefits Trust Fund won’t be able to transition public workers to new drug plans on Jan. 1 — the result of a protest filed by the existing prescription drug vendor which lost the latest contract to the parent company of Longs Drugs.

EUTF has said the drug plan contract, recently awarded to CVS/Caremark through June 30, 2013, would save the state about $24 million in the first year due to lower projected costs for active workers and retirees.

But Illinois-based InformedRx is challenging the award, in part because of a flawed procurement process and "inaccurate and overstated" savings projections, said Mark Fukuhara, EUTF’s first administrator in 2003 and a former EUTF consultant, who now represents InformedRx.

The contracts for active state and county employees, early retirees and Medicare retirees are worth $58.3 million, $16.8 million and $74.5 million, respectively, according to the State Procurement Office of the Department of Accounting and General Services.

EUTF officials didn’t return calls for comment.

"Price is just one component. EUTF gave CVS preferential treatment," Fukuhara said.

Fukuhara said EUTF canceled an original request for proposals in May and reissued another the same day without the proper authority.

"Through the hearing process we learned one vendor didn’t submit a bid on time — the one vendor that didn’t make the deadline was CVS/Caremark," he said.

There were a number of other procurement violations, including erroneous scoring for the number of retail pharmacies operated statewide by each of the bidders, he said.

HGEA member Tina Shelton, a spokeswoman for the University of Hawaii John A. Burns School of Medicine, said it is clear to members that "there was a lot of politics going into that decision" (to award the contract to CVS) since many public workers complained of having to get prescriptions by mail from a mainland operation rather than a local pharmacy.

"It seemed the EUTF board was so stung by the early criticism … that they were going to be very careful the next time," she said. "They did everything they could to have a local company."

Protest hearings held by the state Department of Commerce and Consumer Affairs were Sept. 21-28. Retired Judge James Burns has been retained to decide the case, though no time frame has been set for a decision.

"We remain confident in the merits of the proposal we submitted and look forward to the group’s final decision," said Christine Cramer, a CVS spokeswoman.

If the protest is upheld, the contract could be reissued or awarded to the existing vendor, Fukuhara said.

In the meantime, EUTF approved a six-month extension through June 30, 2012, of InformedRx’s contract at an Oct. 18 meeting.

An EUTF consultant estimates the fund will lose roughly $1.4 million per month under this extension due to the difference between the CVS/Caremark and InformedRx pricing on projected drug utilization, the Hawaii Government Employees Association told members in an email this week. The EUTF has the right to terminate the extension after a 60-day notice.

This leaves Hawaii’s public workers, who are already reeling from medical insurance rate hikes and a higher share of monthly health premiums, without the final rates they will pay for prescription drugs next year.

However, the EUTF board pledged to maintain prescription drug premium rates issued by CVS and use reserves to pay for any losses if costs are higher.

EUTF covers 169,000 active and retired workers and their dependents.