The State of Ohio has become one of the many states that have fallen victim to PBMs’ abusive revenue tactics, as detailed in an audit report finding that the state’s PBMs — OptumRx and Caremark — charged the state a spread of 31% on generic drugs. As a result, the state was charged $224 million, at the expense of the taxpayers, more than what these PBMs paid pharmacy providers in 2017. The results of the report ignited legislative actions against PBMs in the state, including, but not limited to, the Ohio Medicaid requiring its five managed care plans to terminate contracts with OptumRx and Caremark and replace them with supposedly more transparent pass-through PBMs.
Since the release of the audit report, Ohio lawmakers and stakeholders have continued their fight against abusive PBM practices. In March of this year, Ohio’s Attorney General Dave Yost announced that he had filed a lawsuit against OptumRx for overcharging the state $16 million which should have passed on in discounts to the state’s Bureau of Workers’ Compensation. In April, CareSource, the largest Medicaid managed care plan in Ohio and the second-largest in the nation, announced that it was terminating its Caremark contract for its 1.2 million Medicaid beneficiaries in Ohio and the 600,000 Medicaid members it has in Georgia, Indiana, Kentucky, and West Virginia.
Most recently, Ohio State Representative Tavia Galonski introduced a bill in the House of Representatives that seeks to put a stop to abusive PBM practices. The bill would forbid PBMs from retroactively denying claims unless those claims were either fraudulent or incorrect. The bill would also require PBMs to disclose financial statements and information regarding pharmacy reimbursement rates and drug company rebates. For years, PBMs across the country and specifically, in Ohio, have used many tactics such as spread pricing and pharmacy audit chargeback to generate massive amounts of revenue. PBMs have been able to monetize on such practices because the states and the stakeholders do not necessarily have an in-depth understanding and knowledge of the PBM industry. To reduce unnecessary drug spending, states and local governments must demand radical transparency from PBMs – it is critical to obligate PBMs to become fiduciaries of the states – and implement cost-containment strategies in the contracts. In this vein, Ohio Medicaid’s decision to require its managed care plans to terminate contractual relationships with non-transparent PBMs is a step towards radical transparency and cost-containment.
In the current climate, it is critical that Plan Sponsors and/or Stakeholders (such as State Medicaid) proactively seek and demand PBMs for radical transparency. However, their efforts should not stop at that point. Plan Sponsors must be armed with industry knowledge in order to navigate the challenges and pitfalls when contracting with PBMs. Frier Levitt’s Plan Sponsor Practice Group can navigate and uncover complex PBM services and businesses. If you are a Plan Sponsor entering a contractual relationship or having a dispute with a PBM, contact Frier Levitt today.