Greedy benefit managers rip off taxpayers of Ohio

Columbus Dispatch: Ohio Attorney General Dave Yost’s plan to recover millions of taxpayer dollars from a company that he says overcharged the state is a welcome milestone in an unfolding story. Dispatch reporters and analysts hired by the state have spent nearly a year establishing that the public was ripped off, and it’s about time to see about recovering some of that money.

Yost said last week he’ll seek repayment of nearly $16 million in drug rebates that he says pharmacy-benefit manager Optum RX should have passed on to the Bureau of Workers Compensation but instead pocketed.

We hope to see similar action on behalf of the Department of Medicaid, which also was overcharged by Pharmacy Benefit Managers and where much bigger sums of public money are involved.

It’s especially encouraging that Yost expects better cooperation from Gov. Mike DeWine’s Medicaid department than he got from former Gov. John Kasich’s administration when, as state auditor last year, he investigated possible profit padding by third-party PBMs working with Medicaid. Greater cooperation and transparency could lead to more and faster progress in stopping abuses.

When Dispatch reporters first asked about claims by independent pharmacists that the state-hired pharmacy-benefit managers were reimbursing them far less for drugs than what they were charging Medicaid, the Kasich administration’s top Medicaid officials insisted there was no problem.

The state pays five managed-care organizations to handle most of Ohio’s Medicaid clients. Those plans, in turn, hire PBMs to handle the prescription-drug benefit. Contracts between the managed-care plans and the PBMs allowed the PBMs to set the price the states would be charged for a drug as well as how much pharmacists would be reimbursed for that drug.

In some cases, PBMs paid pharmacists only a fraction of what they charged the state and kept the difference.

The contracts were kept secret from the public, but pharmacists unhappy with low reimbursements shared some details with reporters. A Dispatch analysis of the leaked data showed dramatic price spreads.

Only then did Medicaid hire a consultant to study the matter with full data. It found that CVS Caremark billed the state $224 million more for prescriptions than it paid pharmacies. The department at first released only a redacted version of the resulting report. It later agreed to release the full report but CVS and Optum Rx sued to prevent it, and the matter remains tied up in court.

DAMNING DETAILS OMITTED

When Medicaid officials testified to the General Assembly about the report, they left out the most damning details.

The previous administration’s commitment to holding PBMs accountable seems questionable when you consider the number of ties between the Statehouse and the employees and lobbyists of the pharmacy giant CVS: Its PBM subsidiary, CVS Caremark, does the PBM work for four of Ohio Medicaid’s five private managed-care plans and is accused of many of the same abuses as Optum Rx.

In contrast to Medicaid’s initial reluctance to declare PBM payments a problem, the Bureau of Workers Compensation last spring commissioned its own study and discovered the extent of Optum Rx’s overcharging – the conduct that is the basis of Yost’s action to recover $16 million.

While Medicaid asked its consultant to look only at PBMs’ pricing and reimbursement data for generic and brand-name drugs, BWC required Optum Rx to divulge more data. Its study revealed that Optum Rx charged the agency $20 million more than it should have.

As a result, the BWC study says, the bureau was overcharged by $5.7 million in 2017 alone — 6.5 percent of its prescription spending for that year.

BWC fired Optum Rx and hired a new PBM with contract provisions designed to prevent overcharging.

On the Medicaid side, the state now requires PBMs to pay pharmacists exactly what they charge the state for medications, plus a set administrative fee. The companies also are banned from a past “gag order” practice under which pharmacists had to promise not to tell customers when paying for a drug without insurance was actually cheaper than the insurance co-pay set by the PBM.

That’s progress, but the complexity of the deals among the state, managed-care organizations and PBMs leaves a lot of loopholes and potential for abuse to continue. Unraveling secret health-care contracts, making them transparent and insisting on a fair deal for taxpayers should be a top priority for DeWine, Yost and others in a position to make a difference.