The purpose of this Mayor and Council Communication (M&C) is to approve the engaging of a new claims administrator for the City's Pharmacy Benefit Management (PBM) services, which is anticipated to result in substantial savings to the City. The current Agreement for these services, with Envision Pharmaceutical Services, LLC, will expire at the end of the current calendar year.
The City of Fort Worth contracted with the Trion Group (Trion), a Marsh & McLennan Agency LLC Company, to perform an evaluation of detailed pharmacy plan components. As part of its process, Trion developed and illustrated the overall financial impact by comparing estimated annual costs utilizing projected claims coupled with discount, rebate and retention factors proposed by the bidding vendors. This analysis highlighted the "hard dollar" potential cost savings associated with changing vendors. Bidding vendors included EnvisionRx, Express Scripts and OptumRx, Inc.
Both Express Scripts and OptumRx proposed significantly improved pricing and contract terms for the City of Fort Worth, with OptumRx having the most competitive arrangement. The Optum Coalition arrangement allows access to pharmaceutical pricing that is substantially better than what the City could achieve on its own. The coalition approach is anticipated to result in costs that are 17.3 percent better than the current arrangement, with projected one-year savings of $3.8 million and three-year savings of $11.3 million.
The Optum pharmacy arrangement will generally retain the current City of Fort Worth pharmacy plan with very minor formulary and network differences. Having considered the minimal disruption to the City of Fort Worth and its employees, along with the significantly improved financial and contractual terms, it is recommended that OptumRx, Inc., replace EnvisionRx effective October 1, 2017. The City would continue to pay Envision through the expiration of the initial contract term at the end of calendar 2017; however the overlapping administration costs are more than offset by the savings projected to be realized in the last quarter. It is estimated that the administrative fee for Envision during this final quarter will be $60-$80,000.00 based on past experience.
PRICE ANAYLSIS - The City will pay a monthly premium in the amount of $2.50 per employee/non-Medicare retiree per month for a total premium amount of $236,130.00 for the first year.
ADMINISTRATIVE CHANGE ORDER - An administrative change order or increase may be made by the City Manager in the amount up to $100,000.00 and does not require specific City Council approval as long as sufficient funds have been appropriated.
AGREEMENT TERMS - Upon City Council approval, the initial term of this contract shall begin on October 1, 2017 and expire on December 31, 2020.
RENEWAL OPTIONS - This contract may be renewed up to two one-year terms at the City's sole discretion. This action does not require specific City Council approval provided that sufficient funds are appropriated for the City to meet its obligations during the renewal period.
M/WBE OFFICE - A waiver of the goal for MBE/SBE subcontracting was requested by the Purchasing Division and approved by the M/WBE Office, in accordance with the BDE Ordinance, because the purchase of goods or services is from sources where subcontracting or supplier opportunities are negligible.
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