CareSource plans to make a major change to its business model, switching to a new pharmacy contractor and as well as making sweeping changes on how it operates pharmacy services.
The Dayton-based insurance company, which primarily manages private Medicaid plans, said Tuesday that it will be contracting with Express Scripts, switching from CVS Caremark January 2020.
CareSource, which had $8.8 billion in revenue in 2017, will also be making other major changes to its pharmacy program, such as paying pharmacists for health value beyond prescription filling.
The changes will mean a more hands on approach to the management of of prescription benefits for the insurer’s 2 million members, which includes more than half of Ohio Medicaid plans.
“It’s nearly 25 percent of our spend. We can’t farm that out to somebody else. We’ve got to make it a core part of our business. We’ve got to integrate it with all the other elements of our business,” said Erhardt Preitauer, president and CEO of CareSource.
Pharmacy benefit managers — middlemen between insurance companies and pharmacists — for years received little attention for their roles in the pharmacy supply chain, which includes things like negotiating drug prices and processing prescription claims.
But large pharmacy benefit managers are now in the spotlight — even called to testify before Congress — as politicians and pharmacists question the hidden ways they make money, including money from taxpayer-paid insurance programs like Medicaid.
Pharmacy middlemen say they save members money by negotiating discounts.
The debate over the value of pharmacy benefit managers has become part of a broader debate over why prices for U.S. prescriptions are so high and whether anyone in the supply chain is inappropriately profiting.
Preitauer said CareSource’s new direction with its prescription benefits is “a natural direction that the entire industry, I believe, needs to go down.”
Pharmacy middlemen manage billions of dollars for the state of Ohio. The companies billed Ohio Medicaid for $2.48 billion in 2017 and retained $223.7 million, paying out $2.32 billion to pharmacies.
One of the key ways the companies make money is by billing insurance companies for prescriptions and then paying pharmacists a lower amount for what they billed the insurance company. That markup goes to the pharmacy middleman to cover their costs for processing claims and paying employees.
Some pharmacists, however, complained that so little money was flowing from the insurer to the pharmacists that it was putting small pharmacies out of business. They said the pharmacy benefit managers were keeping an inappropriate cut, which hurt taxpayers and pharmacies.
CVS Caremark, with the same parent company as CVS retail pharmacies, which manages pharmacy benefits for four of the five Medicaid managed care companies. In 2017, it kept 8.7 percent or the payments it received, or $197.3 million.
CareSource said its new approach will drive pharmacy savings for states by providing price transparency validated by a third-party, which will mean states have “full visibility to where pharmacy dollars are being spent for their Medicaid beneficiaries.”
The company is also redesigning how it pays pharmacists so pharmacists are rewarded for working beyond just filling and handing off a prescription, with the goal of keeping patients healthy.
“If you think about the average member, typically they actually visit their pharmacist more than perhaps any other provider,” Preitauer said. “And that’s such an opportunity for us to be able to engage, for the pharmacist to be able to engage, and really help the member with whatever they need help with.”
Antonio Ciaccia, with Ohio Pharmacists Association, which has been one of the leading critics of large pharmacy benefit manager tactics, said what CareSource is proposing is an important change toward paying for quality, not paying for volume.
While pharmacists have doctoral degrees and expertise in disease management, Ciaccia said when they get paid low amounts per prescription they fill, they are incentivized to have a quick interaction with the customer and fill prescriptions as fast as they can. If a pharmacist has long personal interactions with each person, they are cutting into their volume.
CareSource members will still be able to go to their same pharmacist but there will be other other changes. The insurer will also have use a platform for analyzing data that will let them see for the first time when each prescription is written and care managers will be able to look at that data along with other behavioral health and medical data to help with better case management.
“Our care managers are really going to be able to drive care where and when it needs to be in a way that we’ve not been able to do before,” Preitauer said.
The issue of pharmacy benefit managers became a campaign issue when then Attorney General Mike DeWine sued the pharmacy benefit managers and criticized the companies during his run for governor.
Under DeWine’s administration, Ohio Attorney General Dave Yost filed a lawsuit in March accusing another pharmacy benefit manager, OptumRx, of overcharging the Ohio Bureau of Workers’ Compensation $15.8 million.
Yost alleges that the overcharges occurred because OptumRx “failed to provide contractually agreed discounts on drugs.”
OptumRx said the allegations are without merit and that it had delivered more affordable prescriptions for the bureau.
Yost said at the time that the state’s review of pharmacy benefit manager practices “is still ongoing.”
“These are the first raindrops, but there’s a storm a-comin’,” he said.
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