A Raleigh council member is raising concerns about the city employee drug plan and two related contracts.
Nancy McFarlane, a registered pharmacist and representative of North Raleigh, said she’s worried the city’s deal with CVS Caremark to provide prescription drug coverage may not be saving as much as officials thought. She’s also trying to find out why a contract with Aon Consulting, the firm hired to evaluate the drug plan, lacked a clause requiring the company to look out for the city’s best interests.
Before October, employee drug coverage was part of the city’s Blue Cross Blue Shield health plan. In an effort to save money, McFarlane said city officials decided to separate the pharmacy portion and bid it out to other vendors.
Shortly before the drug plan went live, the city paid Aon $27,000 to evaluate a bid from CVS. The problem, McFarlane said, is that the contract contained no fiduciary duty clause, which would require the company to act in the sole benefit of the city.
“To pay a company that’s not fiduciary to us — I have serious questions about this,” McFarlane said. “Ideally, you want someone not connected to the other side.”
She said some drug plan providers pay insurance brokers to help secure deals with employers, who aren’t charged for the brokers’ services. That’s the process she says she’s most familiar with when she reevaluates drug coverage for her own company.
Although other brokers may charge employers to find a good coverage plan, she said there’s typically some point in their contracts that requires brokers to disclose any payments they may have received from plan vendors. And although McFarlane said she has no evidence to suggest Aon had any dealings with CVS or any other bidders, she said she wants some basic assurances as a matter of principle.
“I wanted a statement saying whoever negotiates our contract is not being reimbursed by these companies,” she said. “They need to be looking out for our best interest.”
Although Aon Vice President Joe Micucci, head of the firm’s global public relations, said his company won’t comment on specifics, he said his company always looks to benefit its clients — whether their contracts have fiduciary clauses or not.
“We’re acting in the best interest of clients,” Micucci said. “We take that responsibility very seriously, including in this case.”
With any business deal, City Manager Russell Allen said Raleigh officials would be quick to react in the case of wrongdoing.
“If we ever discovered a company was benefiting itself and not giving us good advice, we’d cancel the contract,” Allen said.
But he said most of the work Aon does for the city is “strictly analytical” and wouldn’t need a fiduciary clause in the first place. And because the city self-insures — meaning it pays medical claims itself and contracts with a company to simply administer the program — he said he sees even less opportunities for companies to take advantage of the city.
“We knew apples to apples in the bid,” Allen said. “It’s hard for me to see some fiduciary aspect for Aon that would put the city at risk.”
McFarlane’s concerns don’t stop with Aon. She also believes the drug prices in CVS Caremark’s contract may not be the best deal for the city. Although all drug pricing in the city’s contract with CVS Caremark obtained by the Raleigh Public Record has been redacted on the basis of trade secrets, McFarlane said she’s seen prices for the specialty drugs the company lists through dealings with her own business, MedPro Rx.
“I think we’re paying too much,” McFarlane said. “I’ll just say that.”
Representatives from CVS Caremark would not comment specifically on the contract with the city, but CVS Caremark Director of Public Relations Christine Cramer released a statement via e-mail.
“CVS Caremark is pleased that the City of Raleigh selected us to serve as their pharmacy benefits manager beginning in October 2010,” Cramer said in the e-mail. “We believe we can offer City of Raleigh members the most effective pharmacy care and services available that deliver greater choice and convenience in filling prescriptions, improved health outcomes and lower overall health care costs.”
An examination of both contracts is pending on the council’s Budget and Economic Development Committee.