Contractual Agreement, Pharmacy Benefits Management Services (HealthSelect of Texas)

Good news

The Employees Retirement System of Texas can walk away. Section 2.4 lets ERS end the Express Scripts contract without cause on ninety days written notice (page 2), with no termination fee anywhere in the documents, a pro rata refund of prepaid fees within two business days (page 6), and rebates that keep flowing until ERS has received everything owed (page 5). The five model council rated that clause good, and it is the strongest lever in the file.

Nothing changes without a signature. The contract may be amended only by a written agreement executed by both parties (page 2), and the Fee Schedule is held fixed for the term absent mutual written agreement (page 4). Both amendments and the supplement in this record were in fact signed by both sides.

The audit right is broad. ERS has an absolute right to audit Express Scripts, including the vendor's contracts with pharmaceutical manufacturers (page 18), and audit costs shift to the vendor when errors exceed $50,000 (page 18). Rebates are defined widely, reaching price protection dollars, price concessions and any other remuneration from manufacturers (page 5), and they must be paid over at least quarterly (page 5). Express Scripts agrees to act as a fiduciary (page 2), which most PBM contracts never say. Liquidated damages of up to $10,000.00 per default or per day are available without proving harm (page 12), and no work may be performed outside the United States (page 30).

Bad news

Almost every dollar term is somewhere else. Section 4.1(a) puts the reimbursement schedule and every fee in Exhibit D (page 4), and Exhibit D is a single cover sheet (page 39). Whether Express Scripts keeps a spread between what ERS pays and what pharmacies receive, whether its own Accredo specialty pharmacy (page 4) is paid at acquisition cost, and what the specialty rates are cannot be read. Four rubric items worth 19 of 100 weight points were marked unclear for that reason.

The rebate promise leans on that same missing exhibit. All Rebates are paid as set forth in Exhibit D and at the rate described in the Fee Schedule (page 5), so the text does not itself establish one hundred percent pass through, and the definition only reaches money received under a manufacturer contract for formulary drugs (page 6). Revenue collected by a related purchasing entity sits outside it, and an affiliate named MATRIX GPO, LLC appears on the insurance pages (page 56).

Four protections in the model contract published by Mark Cuban and collaborators are simply absent: no benchmark ceiling on any claim, no protection when a cash price is cheaper than the plan price, no lowest net cost standard for the formulary, and no pass through of group purchasing revenue. ERS must approve formulary changes, but the contract lists manufacturer rebate arrangements as an accepted reason to make them (page 5).

The gag flag is set. ERS' own auditors and consultants may use vendor materials only under a non disclosure agreement with Express Scripts, and the vendor may label material confidential and argue against release to the Attorney General (page 15). The service addendum is stamped Confidential Information and its per member fee is redacted (Service addendum, page 5).

What we could not see

Exhibits B through E, the proposal, clarifications, Fee Schedule and Performance Guarantees, are cover sheets only (pages 37 to 40). Amendment 2 page 4, the restated performance guarantees, is fully redacted. The service addendum fee is blanked (Service addendum, page 5). The council could not score pricing, spread, specialty or performance guarantees, and those are the items that decide what taxpayers pay.

The number

The reconciled score is 44.4 out of 100, grade Concern, computed from 81 scored weight points with 19 excluded as unclear: 4 points good, 64 points partial counted at half, 13 points missing, so (4 + 32) divided by 81. The five seats' own scores ran from 36.4 to 48.1. A strong exit right and a wide audit clause are not enough to make up for a contract whose prices are not on the page.