KATIE WEDELL/STAFF
Photo: Katie Wedell/STAFF
Photo: Katie Wedell/STAFF

Ohio Medicaid sees initial success overhauling $3B drug program

The state’s efforts to reform how it spends $3 billion a year on Medicaid prescription drug benefits is getting early results.

One of the hot topics in Ohio politics in the last couple of years has been the role of pharmacy benefit managers and particularly their role managing prescription benefits on behalf of Ohio Medicaid — the health insurance program for the poor and disabled.

The companies had been a relatively obscure part of the pharmacy supply chain but were pulled into the public spotlight when they were criticized by pharmacists and some lawmakers, who said the companies aren’t transparent and keep too much of the tax money they manage and paying pharmacists to little for their services.

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A new report released Monday by Ohio Medicaid revealed new details on how these companies spend money and showed that since Jan. 1, when the state overhauled the program, the five insurance companies contracted to Ohio Medicaid are paying out more money to pharmacists.

Ohio Medicaid had consultant HealthPlan Data Solutions create the report that was released Monday to see how the reforms that began Jan. 1 were working. The report consultant found a 5.74 percent increase in amounts paid to pharmacies in the first quarter of 2019 under the new system.

Ohio Department of Medicaid Director Maureen Corcoran called the report a positive step forward that shined a light on the inner-workings of this segment of the state’s Medicaid program.

“While the findings of the report indicate positive and successful implementation, there is much more work to come as Ohio Medicaid is deeply committed to safeguarding pharmacy access to the individuals we serve,” Corcoran said. “It is vital that Ohioans have access to life sustaining and—in many cases — life saving medications while also acting as responsible stewards of taxpayer dollars.”

When a pharmacy benefit manager pays pharmacists too little for certain drugs, it can have real consequences for a community, the report noted. A local pharmacy might refuse to stock a drug that members of the surrounding community rely on or might close altogether and limit access to care.

One of the main changes that Ohio Medicaid made was that pharmacy benefit managers needed to become more transparent.

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Under the old system, one of the ways pharmacy benefit managers made money was by keeping the difference between the higher price that Ohio Medicaid plans paid for a drug and the lower amount of money the pharmacy benefit managers paid a pharmacist for the prescription. But the companies did not share what that price difference was that they were keeping for their administrative services.

The public did not know how much of the money the companies were keeping until political pressure mounted and led to the state commissioning a report looking into the matter. Under the new rules that went into effect Jan. 1, pharmacy benefit managers would instead charge a transparent fee for administrative services and the Medicaid money they get to pay for prescription drugs has to directly pass through and pay for prescription claims.

A message was left with CVS Caremark seeking more information. 

PCMA, a trade organization representing pharmacy benefit managers, said in a statement that “PBMs support transparency for patients and their providers, policymakers, employers, unions, and other health plan sponsors so they can make informed decisions that lead to optimal health outcomes and lower prescription drug costs. Unfortunately, the report does not determine the level of savings, if any, the state has attained.” 

There are still issues that need resolved and the detailed 20-page analysis by HealthPlan Data Solutions makes several policy recommendations. This includes several recommendations about how to deal with high priced specialty drugs and the mail-order specialty pharmacies owned by pharmacy benefit managers.

Community pharmacies have accused the pharmacy benefit managers of steering expensive specialty prescriptions toward being filled at their own mail-order pharmacies and prescriptions, which means they get to keep the profit.

The report shows that the pharmacy benefit managers each filled between 35 to 46 percent of their specialty drug claims at specialty pharmacies that their company owned.

MORE: Ohio AG says state owed $15.8M from pharmacy benefit manager

The consultant recommended that pharmacy benefit managers that own a specialty pharmacy allow any willing provider to fill specialty prescriptions available to them with no associated penalties. Ohio Medicaid did not agree with the “any willing provider” requirement but said they made some reforms in the July 2019 contract and are considering additional changes.

“It’s not just about steering high profitable drugs to your own pharmacies. It’s also about steering unprofitable drugs or underprofitable drugs away and towards your competitors. So a typical retail pharmacy is getting cut in two ways,” said Antonio Ciaccia, lobbyist with Ohio Pharmacist Association, which has heavily pushed for pharmacy payment changes. “Overpriced drugs are getting pushed away from them and underpriced drugs are getting pushed toward them. And this report definitely bears that out.”

Meanwhile Dayton-based CareSource, which manages over half of all Ohio Medicaid plans, is ending its contract with pharmacy benefit manager CVS Caremark and is in the process of switching to a reformed system where the insurance company takes a more hands on approach with improvements to how it pays pharmacists.

Stephen Ringel, Ohio Market president for CareSource, thanked Ohio Medicaid for its pharmacy transparency efforts.

“We believe the current PBM (pharmacy benefit manager) model has significant room for improvement and for the last 18 months CareSource has been working to reinvent the model with a new more transparent approach to administering pharmacy benefits,” Ringel said. “We look forward to continuing to drive even more improvements in the system when CareSource RxInnovations goes live on Jan. 1, 2020.”

Skyrocketing prescription drug prices are one of the drivers behind states spending more money on Medicaid. When prescription drug costs climb, it not only claims money that could be spent on other places in the health insurance program but that money also could be spent on other state programs that all want a bigger piece of a limited amount of tax dollars.

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Anthes said one of his main takeaways from the Ohio Medicaid report was that it highlights that there are a lot of complicated reasons why so much money is spent on prescription drugs and fixing the problem means looking at more than just pharmacy benefit managers.

“The drug supply chain is much bigger than just PBMs (pharmacy benefit managers). It’s manufacturers, it’s distribution, it’s pharmacists, it’s how we manage (drug) patents in this country, and there’s only so much that the Department of Medicaid can currently do to control price,” Anthes said.

Ohio Medicaid’s new model publicly reveals much more information about how prescription money is spent, but it is difficult to compare to other states since Ohio is now much more transparent than most other states.

“The fact that we are being so forward in transparency around cost is something I’ve wanted to see for a long time,” said Loren Anthes, who researches Medicaid policy for Cleveland-based Center for Community Solutions, a health and human services think tank. “That doesn’t mean that consumer behavior is going to change per se … It’s policymakers responsibility to address these issues. Hopefully the transparency reinforces that sentiment and when people come back to the table, they can start addressing all parts of that supply chain.”

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