PBMs Overcharged Michigan Medicaid by $64 Million

According to a report by the Michigan Pharmacists Association and 3 Axis Advisors, Pharmacy Benefit Managers (PBMs) overcharged the state’s Medicaid Program by at least $64 million through spread pricing. The report collected data from 451 community pharmacies across Michigan, representing nearly 20% of the 2,356 retail/community pharmacies in the state to analyze PBM spread pricing – the difference between what a PBM pays a pharmacy for a medication and what it charges Michigan Medicaid.

The report pointed out that spread pricing margin increased seventeen times, from $0.20 (CY 2016 Q1) to $3.40 (CY 2018 Q1) per prescription. The report further detailed the effect of moving PBM spread from the point-of-sale to a retroactive Generic Effective Rate (GER) true-up that the state would have no ability to monitor and would also further cloud data regarding prescription drug transactions. GER may likely hide PBM spread margin from the state and overinflate already high drug prices. The report recommended that the state move away from non-transparent PBMs and undertake a thorough analysis of PBM contracts.

Based on those factors, it would not be surprising to see Michigan Medicaid joining the list of states that have already taken the initiative to demand radical transparency from PBMs. This trend will continue to grow and more states and plan sponsors will put PBMs under scrutiny for unexplained fees and costs. Nonetheless, plan sponsors, including state Medicaid, experiencing a lack of transparency from PBMs has become an industry norm.

Frier Levitt routinely works with plan sponsors, to control or eliminate spread pricing, evaluate and confirm rebate compliance, conduct PBM audits to ensure compliance, and negotiate better terms in future PBM contracts. If you are a Plan Sponsor entering a contractual relationship or having a dispute with a PBM, contact Frier Levitt today to speak to an attorney.