Pharmacy benefit managers are receiving $1.54 per pill from Ohio’s Medicaid program for a drug commonly used to treat depression.
The state pharmacy association and operators of nearly two dozen pharmacies across the state say those same pharmacy benefit managers, or PBMs, are paying them only about 18 cents for each of those pills.
The difference of $1.36 per pill, which comes from taxpayers’ pockets, goes to the benefit managers.
And with more than 4.9 million of those pills covered by Medicaid managed care for Ohioans in 2017, that spread comes to almost $6 million, based on a Dispatch analysis of national drug data and reimbursement numbers from some pharmacies. And that’s for just one type of pill — a 60-milligram caplet of duloxetine — out of nearly 3,000.
Benefit managers, which serve as middlemen between the pharmacies and the state on behalf of managed-care companies, don’t receive the benefit of that kind of price spread on every prescription. But with 2.2 billion pills prescribed last year under Ohio’s Medicaid managed-care program, this example illustrates two complaints from the state’s pharmacists:
‒ The reimbursement that pharmacies receive from benefit managers doesn’t cover their costs, which they say is a major reason Ohio has lost 165 independent pharmacies in the past two years.
‒ Taxpayers are being overcharged many millions of dollars for the money flowing to benefit managers.
“To call this alarming would be an understatement,” said Antonio Ciaccia, head of government affairs for the Ohio Pharmacists Association.
“These PBMs are some of the largest corporations in the world, and it looks as though they have an unchecked ability to drain as much taxpayer money out of our Medicaid program as they can,” Ciaccia said.
Christine Cramer, senior director of corporate communication for CVS, which operates by far the biggest PBM in Ohio, said, “We reimburse our participating network pharmacies, including the many independent pharmacies that are valued participants in our network, at competitive rates that balance the need to fairly compensate pharmacies while providing a cost-effective benefit for our clients.”
Ohio Medicaid officials say they are working to get a clearer picture of where the $3 billion-plus spent on pharmaceuticals each year goes.
“We’ve started a complete analysis of what we pay the managed-care companies, what the managed-care companies pay the PBMs, and what PBMs pay pharmacies,” said Dr. Donald Wharton, Ohio Medicaid’s assistant medical director who oversees pharmacy benefits.
Under contracts that begin in July, the five managed-care companies with which Ohio contracts to coordinate health services for 89 percent of Medicaid patients will be required to tell the state exactly how much the pharmacy benefit managers they hire are paying pharmacies. CVS Caremark is the PBM for four of Ohio’s five managed-care companies.
Under their current contracts with the state, the managed-care companies report only how much they pay benefit managers. Information on what PBMs pay pharmacies has to come from individual pharmacies.
“Non-transparency is a concern,” Wharton said. “Spread pricing is how the PBM gets paid. We know it goes on, but we don’t know the volume.”
State Rep. Emilia Sykes, an Akron Democrat who sits on the legislature’s Joint Medicaid Oversight Committee, is among the state officials demanding answers.
“While pharmaceutical prices are rising, pharmacies say they are getting less, raising the question of who is getting the money. Something is not right, and we have no idea what is actually happening,” she said.
“We cannot sit on our hands any longer and keep lining the pockets of executives. The PBMs have been able to operate under the radar for a long time.”
Gretchen Blazer Thompson, director of government affairs for the Ohio Association of Health Plans, said her group supports state efforts to address the issue.
The association “believes PBM transparency is the first step toward a robust conversation that must take place with all parties within that chain — pharmacists, the pharmacy benefit managers, the pharmacy group purchasing organizations, the health plans, the drug manufacturers and the wholesalers — focused on drug pricing and transparency,” Thompson said.
“This is imperative to understanding what is driving drug costs, the impact those costs are having on Ohio’s purchasers of pharmacy care, and the consequential solutions that might offer relief to the consumers, who ultimately bear the unsustainable, high cost of drugs.”
To make the comparisons between what pharmacy benefits managers and the pharmacies themselves are receiving, The Dispatch analyzed a federal drug utilization database of more than 35 million prescriptions issued through Ohio’s Medicaid managed-care program in 2017. Those numbers were merged with the National Average Drug Acquisition Cost database. The costs stemmed from September, the latest figures available for Medicaid spending.
The Dispatch obtained local pharmacy costs for that month from individual pharmacies, which are not being named in this story because they say their contracts forbid them from disclosing the information.
Pharmacy benefit managers, like managed-care companies, are supposed to save money for the state. But critics say these groups that decide reimbursements paid to pharmacists and amounts billed to the state are little-regulated middlemen with unchecked power.
“We thought there was some nominal fee to PBMs but had no idea (the fees were so large). It’s ridiculous,” said Sen. Bill Coley, R-West Chester, also a member of the Medicaid oversight committee.
“What scared me the most is we don’t know what the PBM is paying the pharmacy — that’s crazy.”
Coley is particularly angry about benefit-manager contracts that forbid pharmacists from informing a patient when a prescription would be cheaper if the customer pays out of pocket, without tapping insurance, instead of paying the insurance co-payment.
“It’s like those crooked carnival games — you lose every time,” he said.
The GOP legislator wants the state attorney general to determine whether the gag arrangements are legal; if they are, he vows to outlaw such provisions.
The Dispatch picked a sample of 10 drugs for pharmacists to share their Medicaid reimbursement rate from benefit managers. Those medications ranged in price from less than a dime a unit to almost $20 per tablet. The selection ranged from highly popular drugs with more than 50 million units dispensed last year to more specialized drugs with only a little more than a million pills handed out under the state Medicaid program.
The Dispatch sent the prices it had obtained for the 10 drugs to CVS about midday Friday.
“It’s impossible to determine if complex numbers such as this are accurate with only a few hours to review,” Cramer replied on Friday evening.
“In some cases, particularly on generic products, we make a positive margin, and in some cases, we have a negative margin, which is to the client’s benefit. As a result, reviewing discrete prescription claims does not provide an accurate or comprehensive representation of the true financial arrangement and exposure accepted,” she said.
Sometimes, the margin between what the pharmacy benefit manager received from Medicaid and what it gave to a pharmacy was small. For example, the PBM received 8 cents for a 300-milligram capsule of gabapentin, which is used to treat seizures and nerve damage from shingles. The PBMs in turn paid about 5 cents to the pharmacies.
The Medicaid payment to benefit managers for buprenorphine naloxone, which is used to counter drug overdoses, was $4.39 for eight 2-milligram tablets. The PBMs gave the pharmacies about $3.83.
On the other hand, the benefit managers are receiving $19.66 for each 6-milligram tablet of paliperidone, which is used to treat schizophrenia, but they are giving pharmacies around $13.15 — a spread of about $6.50 for every pill. Multiply that margin by the more than 1.2 million 6 mg tablets obtained through Medicaid managed care last year, and it comes to more than $8 million.