COLUMBUS — Six months after state officials were asked whether they have the authority to crack down on a controversial money-making maneuver by pharmacy benefit managers, Ohioans finally have an answer: They do.
And they will.
For the first time, the state Department of Medicaid is asking for a detailed accounting of so-called “clawback” fees that pharmacy benefit managers, known as PBMs, assess pharmacies after prescription drugs are dispensed to some of Ohio’s 3 million-plus poorest and disabled residents.
Since those clawbacks aren’t charged until well after the drugs are given to recipients, the state can’t keep track of them, Medicaid Director Maureen Corcoran acknowledged in late October.
That shortcoming leads to three major ramifications:
1. The cost of hundreds of thousands of Medicaid drug transactions as recorded by the state and reported to the federal government in recent years is inaccurately inflated.
2. The PBMs are violating at least the intent and spirit of an Ohio law banning clawbacks, as well as a separate provision mandating “pass-through pricing,” Corcoran said. The latter requires PBMs to charge the state the same price they pay pharmacists to fill a prescription for a Medicaid recipient.
3. The data on which Ohio Medicaid relies to set its payment rates — including how much state and federal taxpayers are assessed — likely are wrong. She said this is probably true in most states, which means taxpayers nationwide are being charged billions too much to pay for Medicaid prescriptions.
Lisa Lawless, spokeswoman for the Medicaid department, said the agency is merely exercising its oversight authority in light of PBMs’ past “lack of transparency and excess profits.” Thus the agency needs “visibility into post adjudication adjustments” made by the PBMs after the department in effect has deemed the drug transactions closed.
The action covering calendar years 2020 and 2021 comes more than six months after The Dispatch reported on the sweeping national scope of clawbacks. Corcoran had said at the time, and repeatedly over ensuing months, that she was unsure whether her agency has the power to pursue the possible abuse of Ohio law.
“This is a solid move in the direction of greater accountability of how Medicaid dollars are spent on prescription drugs, and it is a necessary response to recent PBM maneuvering to further obfuscate drug pricing and evade state attempts to rein in waste,” said Antonio Ciaccia, head of drug-pricing analytic firms 46Brooklyn and Three Axis Advisors.
‘You’re getting ripped off,’ says critic; PBMs strongly disagree
Greg Lopes, assistant vice president of strategic communications for the PBMs’ trade group, the Pharmaceutical Care Management Association, said the group couldn’t specifically address Ohio Medicaid’s probe of the drug chain middlemen.
“PBMs will continue to work on behalf of Ohio Medicaid enrollees to reduce prescription drug costs,” he said.
Spokesmen for the PBMs have repeatedly said they do not charge “clawbacks” as they define them, and that the money assessed pharmacies is allowed under complex “generic effective rate” contracts.
“You’re getting ripped off,” said Delaware state Auditor Kathleen McGuiness after her office completed a study in June on the lack of transparency and accountability in “predatory” drug pricing.
Eric Jergens, owner of the Madison Avenue Pharmacy in Springfield, said last summer, “I call them ‘pay to play’ fees. … They’ve almost ruined or demolished independent pharmacies over the last several years.”
Long Trinh, a regional director for pharmacy operations and compliance for Providence St. Joseph Health, a network of 52 hospitals and nearly 1,100 clinics sprawling from Alaska to Texas, in July called the PBMs’ strategy “a likely culprit and contributor to why we are the most expensive country in the world compared to other nations as it relates to health care expenditures.”
Pharmacies essentially are forced to accept contracts allowing for clawbacks because to stay in business, they must deal with a highly consolidated U.S. health-care marketplace.
Just three PBMs control more than 75% of the U.S. market, and they stand among the largest corporations in the world: CVS Health (parent of CVS Caremark, a PBM) ranks 4th on the U.S. Fortune 500; PBM Optum’s parent company UnitedHealth Group is 5th; Cigna, parent of the Express Scripts, climbed more than 50 spots to No. 13 in just one year after completing its merger with the PBM.
Did state drop ball in oversight of pharmacy benefit managers?
The state is seeking the information about PBM clawbacks from the five managed care organizations it hired to carry out day-to-day operations of the Medicaid program. Those five contracted with PBMs to handle the drug transactions.
The Dec. 22 Medicaid memo noted the managed care plans are supposed to be keeping track of PBM spending; if they haven’t, they are asked to “please explain the discrepancy.” The state wants a full list of all “effective rate contracts” as well as the maximum time allowed under the agreements to finalize payments with pharmacies.
The questions, prepared by Medicaid consultant Milliman, are quite detailed, right down to a request for which drugs on the state-approved formulary are subject to clawbacks. That’s a list of well over 30,000 drugs.
The Medicaid request appears to confirm that the state has not been closely monitoring whether the managed care organizations are fulfilling their responsibilities to keep tabs on the PBMs.
For example, the organizations are contractually obligated to “audit and review contracts or agreements between the PBM and their pharmacies at least annually to ensure correct pricing has been applied.” But the state agency is just now asking whether the managed care groups even have such a provision in their contracts with the PBMs.
Left unsaid in the Medicaid directive and questionnaire was what would happen if either the managed care groups or PBMs do not provide the requested information. Responses are due on Jan. 14.
Also not spelled out is what the state will do if the use of clawbacks is confirmed. Several other states are gathering information for potential prosecution. Ohio Attorney General Dave Yost has declined to say whether such an investigation is warranted in the Buckeye State.
Several states are moving to mimic Ohio’s 2019 ban on clawbacks as PBMs increasingly use them as revenue declines due to crackdowns on previous maneuvers such as spread pricing. That’s a process in which a PBM pays pharmacies a lower rate for drugs than it received from the state for the same drug purchase.