Contracts without Clarity – May Result in Lost Retiree Health Benefits

Yesterday the Supreme Court Ruled in favor of the employer in the case of M&G Polymers USA, LLC vs. Tackett, U.S. Supreme Court, No. 13-1010.  The ongoing litigation began in 2006 when M&G announced they were requiring retirees contribute towards their retiree health care benefits.  The union and retirees argued language in their contract implied a lifetime duration of full company contribution to the cost of health benefits.  The employer however pointed out the duration of the benefits was not clearly stated in the contract.


Justice Clarence Thomas, on behalf of the court, wrote “when a contract is silent as to the duration of retiree benefits, a court may not infer that the parties intended those benefits to vest for life”.

This is not a simple win for M&G Polymers USA; the case is to be retried.

Both employers and unions alike should take careful note of this situation in regard to their own health care benefit contracts.  This outcome, as well as the impending extra trial, is a well-publicized example of two parties neglecting to produce clear and concise contract language.

For related articles, click here for Insurance Journal or here for Employee Benefit Adviser.

Teva wins Supreme Court Ruling to Delay Generic Competition for Copaxone – Its Top Selling Multiple Sclerosis Drug

gavel and pillsThe U.S. Supreme Court overturned a decision by a federal appeals court for Teva Pharmaceuticals in its fight with generic drug manufacturers over patent protections for Copaxone. The 7-2 vote sent the case back to U.S. Court of Appeals for the Federal Circuit for additional review as the correct approach was not utilized in analyzing whether the patent in question was valid.  This means Teva will be able to protect Copaxone from generic competitors until September as well as have more time to shift patients to a longer-acting version of the drug that won’t face generic competition until 2030. Teva’s goal is to shift as many as 80 percent of its daily Copaxone patients because this drug along brought in more than $4 billion dollars in 2013.

State of RI Crushed by OPEB Liability

rhode-islandAfter nearly three years of careful study, review and formal discussion regarding Rhode Island locally-administered pension and other post-retirement benefit obligation plans of municipal entities, the Rhode Island Pension & OPEB Study Commission Committee has released their Recommendations to the Governor and General Assembly.

The Committee has determined that the 24 communities included in the study, comprised of 34 separate pension plans, owe over $5.1 billion in pension and OPEB liabilities to existing and future municipal employees.  This unfunded liability is comprised of $2 billion in pension benefits and about $3.1 billion in OPEB (primarily health-care costs for retirees and dependents) obligations.

The committee has defined a sub category of ‘critical status’ plans, which represent plans with less than 60% of the necessary funds or assets available.  By following the state required corrective funding formulas, the more urgent ‘critical status’ plans would be back on track for proper funding by the year 2033.

An important finding in the study is that while oversight of locally administered plans is necessary in funding, a “one-size-fits-all” approach to managing plans, with a single central agency is not the answer.  The committee maintains that the numerous locally administered plans have vastly different contracts and funding complications.

The Rhode Island Pension & OPEB Study Commission Committee recommendations include:

  1. Lawmakers require communities to present annual status reports to the state on their pension plans and OPEB liabilities.
  2. Establish a RI state board to ensure locally administered plans follows best practices of actuaries and government financial standards.
  3. The possibility of withholding non-educational state aid if a community fails to pay at least 95% of its required contribution to the fund for two consecutive years. It was suggested this withheld aid would go towards the plan’s pension and OPEB fund to reduce the unfunded liability.

A glaring omission from this report is what options or resources does the state of Rhode Island, specifically locally administered plans, have to lower the cost of the promised retiree healthcare without reducing the benefit level?  Lowering the initial cost of retiree healthcare and providing ongoing cost management are key pieces to the OPEB funding puzzle.

On January 20th the RI Interlocal Trust voted for the creation of a multi-employer OBEB trust to offer to its 120 public sector entities.  PARS (Public Agency Retirement Services), a nation leader in OPEB trust administration, will assist the Rhode Island Interlocal with creating and managing the new program.

PARS maintains a close working relationship with KTP Advisors, a Newport, RI based advisory firm specializing in retiree health benefits, private exchange comparisons, RDS reopening and pharmacy benefits.

For the full report, click here: Recommendations to the Governor and General Assembly


Fewer Drug Choices but at a Lower Cost: Gilead Responds to AbbVie’s Exclusive

Monday, January 5th Gilead Sciences announced it had won exclusive access to the many hepatitis C patients whose drugs are managed by CVS Health, the nation’s second-largest pharmacy benefits manager.  This means CVS Health managed Sovaldihepatitis C patients (via commercial drug list, health care exchanges, Medicare Part D and Medicaid) will only have access to Gilead’s hepatitis C drugs, Harvoni and Sovaldi.

This exclusive is especially important to the marketplace as it closely follows AbbVie, Gilead’s primary hepatitis C competition, exclusive struck last month with Express Scripts, the largest U.S. prescription drug benefit manager.

Following Express Scripts announcement last month, Gilead’s shares dropped significantly.  Since CVS’s exclusive was revealed on Monday, Gilead’s shares have risen while simultaneously AbbVie’s fell.

What does this mean to consumers, doctors and drug makers? AbbVie’s exclusive with ESI put the pressure on Gilead to make a deal with someone else.  This is good for consumers because it means serious discounts are being negotiated by the PBMs on high price specialty drugs.  This is also positive news for containing overall health care costs.  Pharmaceutical manufacturers now must consider competing on price rather than just efficacy. On the down side, this trend may lead to other drug limitations in other therapeutic classes.  Ultimately doctors will have fewer drug choices for treatments.  This is a form of health care rationing and this trend will continue in the U.S. because health care costs are unsustainable.

Catamaran’s Acquires Salveo Specialty Pharmacy

catamaranlogoEffective January 2nd, 2015, Catamaran Corporation (NASDAQ: CTRX) has completed acquisition of Salveo Specialty Pharmacy for the reported purchase price of $260 million.  Catamaran released a statement affirming the acquisition emphasizing the PBM’s ongoing commitment to expanding their specialty Rx side.  It appears specialty pharmacy will continue to be the hot topic going into 2015.

Catamaran manages more than 350 million prescriptions each year for over 32 million members.

For the full article please click here: Catamaran Completes Acquisition of Salveo Specialty Pharmacy