The Ohio Department of Medicaid had been burned in the past by the big middlemen. And pharmacies across the state for years had said their Medicaid reimbursements were so scant that it was hard to stay in business. So the Medicaid department in 2022 gave the big pharmacy benefit managers — or PBMs — the boot and created a new system of paying for drugs.
The result: Dispensing fees paid to pharmacies were boosted more than 1,200 percent on average — and the new setup still achieved savings of $140 million over a two-year period, according to a study done by Milliman, the Medicaid department’s actuarial firm.
At the same time, the system managed to sign up nearly every pharmacy in the state, the report said. That makes medicine more accessible to Medicaid patients, who often lack access to reliable transportation.
“Bottom Line: The (new system) delivers on its goals of accountability, transparency, and fairness — while doing so at a significantly lower administrative overhead cost to taxpayers,” the Medicaid department said in a cover letter to lawmakers that accompanies the study.
The three biggest PBMs in the United States are each owned by one of the 15 largest companies — UnitedHealth Group, CVS Health and Cigna-Express Scripts. The conglomerates own major insurers and myriad other health businesses, such as doctors’ offices and pharmacies.
Their pharmacy benefit managers work on behalf of those and competing insurers to facilitate drug transactions that run through their own and competing pharmacies. They decide which drugs are covered by insurance and which get preferential treatment.
Combined, the big-three PBMs control nearly 80 percent of the insured drug transactions in the United States. That gives them great leverage to negotiate huge rebates and fees from drugmakers and to impose opaque contracts on pharmacies.
The big PBMs have long claimed they use their size to squeeze savings from drugmakers and pharmacies that they pass along to the insurers they represent. The conglomerates that own them also say that strict firewalls stand between their business units to keep their middlemen from providing unfair advantages to insurers and pharmacies owned by the same corporation.
But there are widespread complaints that the PBMs’ dealings are far from transparent, making it impossible for outsiders to know whether they’re getting a good deal. In 2018, the Ohio Department of Medicaid learned that it wasn’t.
Independent and small-chain pharmacies across Ohio had been complaining that they were getting killed in the Medicaid program. The reimbursements and dispensing fees they got from CVS Caremark and OptumRx were so low that it was making it hard for them to stay in business, they said.
The Columbus Dispatch in 2018 undertook an investigation. It gathered confidential reimbursement data from dozens of pharmacies, compared them to Medicaid claims data and determined that the two PBMs were charging the state a lot more for drugs than they were paying the pharmacies that had bought and dispensed them.
That prompted the Department of Medicaid to get the PBMs to turn over all their data. It commissioned a study showing that in 2017 alone, the two PBMs servicing the program charged taxpayers $224 million more for drugs than they paid out to pharmacists.
Those and other revelations prompted Ohio Attorney General Dave Yost to file several lawsuits against the PBMs on behalf of state agencies. In addition, state lawmakers in Ohio and elsewhere have passed a raft of laws aimed at reigning them in, and the Federal Trade Commission is investigating and suing the companies.
For its part, the Ohio Department of Medicaid fired CVS Caremark and OptumRx and devised its own PBM.
Launched in October 2022, it unbundled the services that had been provided by the big PBMs to create transparency and ensure contractors weren’t imposing huge markups as they had in 2017.
In the interest of keeping pharmacies whole, it also mandated a huge increase on dispensing fees paid to them — from an average of just 73 cents per prescription under the old system to $9 under the new one, the report said. Partly as a result of that, the Medicaid department was able to get almost every pharmacy in Ohio to join its network and thus maximize accessibility for recipients.
The single PBM “pharmacy network is the largest, most inclusive in-state pharmacy network ever, with over 99 percent of Ohio pharmacies contracted as in-network providers, the Medicaid department said. “In addition to standard retail pharmacies, Ohio Medicaid beneficiaries also have access to specialized compounding pharmacies, mail-order pharmacies, home delivery pharmacies, and specialty pharmacies. In total, over 2,600 unique pharmacy locations are contracted with (the single PBM), including nearly 250 accredited specialty pharmacies.”
The Medicaid department also boasted that recipients enjoy “complete freedom of choice with respect to their pharmacy selection” because Gainwell, the company that runs its PBM, doesn’t own a pharmacy.
CVS Caremark and OptumRx are part of giant health conglomerates that also own pharmacies. Yost and 38 other state attorneys general last week accused the conglomerates of using their middlemen to favor their own pharmacies over their competitors. In a letter, they called on Congress to prohibit the health care giants from owning both PBMs and pharmacies.
The Medicaid department said it avoided such conflicts under its new arrangement.
“Under the (former arrangement), members were often steered to PBM-owned or affiliated specialty pharmacies; today, members are provided their options and are free to select the pharmacy provider that best meets their needs,” the department said.
In addition, the new, single PBM eliminated duplicative administrative costs. That measure saved $333 million over two years when compared to what they would have cost under the old system, according to models created by the Medicaid department’s actuaries.
If you deduct increased dispensing fees and other new expenses from those savings, the new system created net savings of $140 million over a two-year period, the actuaries said.
The new system “has delivered much needed accountability and price transparency for Ohio taxpayers and Ohio pharmacies, providing assurance that Ohio’s tax dollars are spent appropriately,” the Medicaid department said.
This article was published by the Ohio Capital Journal. Read the original here.
