Despite big predictions, not much state legal action against drug middlemen

By: - June 19, 2020 12:50 am

A pharmacy manager retrieves a a medication. Credit: Joe Raedle/Getty Images.

There was a lot of talk by state officials about reigning in prescription middlemen working for the state. But on the legal front, there hasn’t been a lot of action.

In February, 2019, as Ohio Attorney General Dave Yost announced his office would move against one company  accused of bilking the Bureau of Workers’ Compensation, he promised many more such actions against companies known as “pharmacy benefit managers.”

The firms, also known as “PBMs,” had been getting a lot of negative press. For example, they were shown in 2017 to have used an obscure scheme to bill Ohio taxpayers almost a quarter-billion dollars more for Medicaid drugs than they were paying pharmacies to dispense them.

The companies had similar, less-than-transparent arrangements under which they were handling drug transactions worth huge amounts on behalf of Ohio’s pension systems and other state agencies. And the money they have been collecting appears to many to be excessive.

“If you look at what our managed-care companies get from Medicaid — and they’re the ones that have direct contact with the patient, coordinating with care with the healthcare providers — we pay them three or three-and a half percent,” said Ohio Sen, Bill Coley, R-Liberty Township, a member of the legislature’s Joint Medicaid Oversight Committee. “The PBMs did not see one patient, did not manufacture one drug and they didn’t dispense anything. And yet they are taking 30 — three zero — percent of the total spend. That’s just not a good business model. That’s wrong.”

The companies dispute that they’re raking in such a large percentage.

PBMs work for managed-care companies to provide services such as creating lists of covered drugs, negotiating rebates from manufacturers, determining reimbursements to pharmacies and paying them. However, under their contracts, the PBMs render many of these services behind a veil of secrecy.

When his agency audited some of the transactions in 2018, Yost didn’t like what he saw.

Speaking at the Associated Press’s 2019 legislative preview, the attorney general described his office’s effort to claw back almost $16 million from OptumRx because he said the pharmacy benefit manager failed to provide the Bureau of Workers Compensation discounts required under its contract. Then he hit the assembled reporters with a line that seemed to have been crafted in advance.

“I get the question from time to time, ‘Are there any other shoes to drop?’ Baby, we’re in DSW,” Yost said, making a reference to the Designer Shoe Warehouse.

A subsequent press release from his office quoted Yost as saying, “Our review of PBM practices throughout state government is still ongoing,” Yost said. “These are the first raindrops, but there’s a storm a-comin’.”

Yet 16 months on, there’s no public evidence that additional shoes have dropped and Yost’s office is reluctant to say much about the matter.

“We filed a motion for summary judgement in Franklin County Court of Pleas and are awaiting a decision,” spokeswoman Bethany McCorkle said in an email. “We are actively looking at other PBM cases similar to the (Bureau of Workers’ Compensation) case but aren’t in a position to share anything at this time.”

In the case that’s been filed, the state is demanding that OptumRx, which is owned by UnitedHealth Group, one of the largest healthcare companies in the world, repay $16 million. 

Optum responded by saying the state acted in bad faith by changing administrative rules governing how much PBMs charged state agencies in 2016, while Optum was renegotiating its contract with the Bureau of Workers Compensation.

“OptumRx is committed to providing affordable, convenient access to prescription drugs and ensuring the lowest costs for consumers and payers,” Optum spokesman Andrew Krejci said in an email Thursday. “We believe this case has no merit and will vigorously defend ourselves.”

A trial in the case is scheduled for next year.

Coley and other lawmakers have been frustrated that more hasn’t been to reform the way PBMs do business in the state. Independent pharmacists have said the reimbursement practices of the giant corporations have driven many out of business and left others barely hanging on.

Coley said he’s also not happy with the pace of legal action against the PBMs. However, he said, that might not be Yost’s fault.

“I have total confidence in my AG,” Coley said. “They’re first-rate attorneys and they’re aggressive. I’m guessing if they’re saying there’s other shoes to drop they’re getting all their ducks in a row and it’s taking awhile.”


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Marty Schladen
Marty Schladen

Marty Schladen has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017. He's won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.