Members of the state insurance committees this morning voted to award CaremarkPCS Health the state’s five-year prescription drug benefits contract.

Caremark beat out competitors Catalyst Rx, Cigna and Rx Solutions to contract directly with the state to provide pharmacy benefit management services for 275,000 state workers and their dependents as well as local government and education employees on the state’s insurance plans. In the past, the three insurance carriers contracted with a pharmacy benefit manager or had their own PBM as a wholly-owned subsidiary.

Under the contract, which runs from Feb. 16, 2010 through June 30, 2015, the state will pay Caremark a maximum of $17.5 million in administrative, clinical and drug adherence fees. The state’s total net drug spend, including claims paid to pharmacies, will be about $1.38 billion over five years, compared to the $1.55 billion it would have spent under existing plans.

The other PBMs all would have cost around $1.55 billion, with just a few million dollars separating them. Caremark’s main differentiator is discounted drug prices under its purchasing agreements.

Laurie Lee, executive director of benefits administration for the state, explained that price considerations were weighted most heavily in determining which PBM to select, but said Caremark’s formulary also provides the least amount of disruption to state health plan members.

Lee also addressed concerns regarding pending litigation against CVS Caremark. Her memo to insurance committee members explains the state’s position on the matter:

“In the course of the procurement, we received correspondence from an outside organization making allegations about CVS/Caremark’s litigation history with various states as well as a pending Federal Trade Commission investigation involving the company. In light of the serious nature of the questions, we referred the issues to [Finance and Administration’s] legal counsel who sought advice from the Attorney General’s office.

“As a result of the Attorney General’s office’s advice, we continue to recommend award of the contract to CVS/Caremark as the best evaluated proposer. If the contract is awarded to CVS/Caremark, we will work with the Attorney General’s office to include additional strong language in the contract addressing the steps we will take, up to and including termination fo the contract, if there is a finding of misconduct in any legal proceeding, including the FTC investigation. Please also note that, as indicated above, our proposed contract does address the transparency issues that were part of the allegations that the outside organization raised against CVS/Caremark.”