(NOTE: This post has been updated with Centene’s June 14 settlement of litigation filed by the states of Ohio and Mississippi.)
In June of 2018, after months of intense pressure from the Ohio Pharmacists Association, Ohio state lawmakers, and Columbus Dispatch investigative journalists, the Ohio Department of Medicaid released a blockbuster report showing that PBMs working on behalf of Medicaid managed care plans charged the state $224 million in hidden spread pricing. Spread pricing is a controversial practice in which PBMs pay a pharmacy a low rate for dispensing a drug, bill a health plan a higher rate for the same transaction, and pocket the difference.
Shortly thereafter, then-State Auditor Dave Yost released his own audit that shed even more light on PBMs’ unprecedented fleecing of pharmacies and taxpayers. In all, PBMs were found to have charged the state more than three to six times the going rates for their services. As a result, the state fired those big PBMs, moved to a more transparent system, and rooted out conflicts of interest.
And it’s no surprise that with all these repairs, the state projects that it will save around $150 million to $200 million per year.
One of the overlooked controversies in the 2018 Medicaid audit in Ohio was a nugget that uncovered an additional $20 million in spread under Centene’s Ohio offering, Buckeye Health Plan. That brought the entire Ohio PBM spread-pricing haul to $244 million. The state found that while managed care plans’ PBMs captured spreads of almost $6 per prescription on average, the Buckeye plan’s total spread was almost $12 per prescription.
In one specific call-out, the Ohio lawsuit alleges that the Centene’s Buckeye Health Plan charged the state nearly $2 per prescription in dispensing fees, but instead of paying them to the pharmacies that actually dispensed the medications, Centene pocketed $1.45 per prescription for themselves.
The relentless pursuit of PBM reform continues on several fronts.
On June 14, Centene announced that it has settled litigation filed in Ohio by Yost (now the state’s attorney general) and by the state of Mississippi. Without admitting fault, Centene agreed to pay $88 million to Ohio and $55 million to Mississippi. It has set aside an additional $1.1 billion should it decide to settle similar lawsuits filed in Arkansas, Georgia, Kansas, New Mexico and several others.
The mounting scrutiny of PBMs is a welcome sight for pharmacists, and it’s gratifying in many ways that my home state Ohio continues to lead the charge.
The important thing to remember is that this is about much more than Centene and its PBM subsidiaries. Remember, out of $244 million in 1 year of Ohio Medicaid spread, Centene’s slice wasn’t even 10%. CVS Caremark and OptumRx will have their turn soon enough, but it isn’t about them, either.
The takeaway is that the United States has allowed intentional complexity and opacity to eclipse what should otherwise be a very straightforward and simple transaction. PBMs were supposed to streamline that transaction and strike a balance to create a fair payment to the pharmacies dispensing medications to patients. Instead, PBMs added unnecessary complications, layers of secrecy, and massive amounts of waste.
If PBMs are willing to engage in these kinds of dirty tricks in our Medicaid programs—intended to provide care to society’s most disadvantaged—you can only imagine what they’re doing to our small employers and seniors in Medicare.
APhA is working hard to make sure that Ohio’s work isn’t happening in isolation. Our states are making tremendous strides, and with Arkansas’s big victory in Rutledge v PCMA, this is our moment to restore order within our profession.
Stay tuned in the coming weeks to hear about APhA’s latest investments that will push our foot harder on the gas. Until then, please support our efforts.