Are companies being sued by Ohio also bidding on new Medicaid contract?

By: - August 19, 2020 12:50 am

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

The Ohio Department Medicaid won’t say whether it will award a big contract to companies against whom the state has filed lawsuits claiming the companies ripped off state agencies in transactions involving prescription drugs.

The department says competitive-procurement requirements prevent it from commenting because it is in the “quiet period” of procuring a new vendor.

Ohio Medicaid is preparing a big, new contract in an attempt to get a handle on the middlemen through which it’s spending more than $3 billion a year on prescription drugs. Frustrated with accusations of overcharging, double dipping, anti-competitive practices and a lack of transparency, the Ohio legislature last year passed the plan for a single pharmacy benefit manager as part of the state budget.

Under the current arrangement, three pharmacy benefit managers — OptumRx, Express Scripts and CVS Caremark — contract with the state’s five Medicaid managed-care companies to handle prescription drug transactions. Among the services the PBMs provide: They contract with and determine reimbursements to pharmacies, they bill managed care providers and they negotiate and collect rebates from manufacturers.

One reason why their operations have been hard to penetrate is they don’t contract directly with the state. 

Instead, they contract with managed-care providers, which like the PBMs are private companies. In fact, CVS Caremark and OptumRx are suing the Medicaid department in an attempt to keep 2017 data regarding billing and reimbursements secret.

In an attempt to pull back the veil, the single PBM legislation requires that entity to contract directly with the Medicaid department, so state officials would have ready access to its data.

The Medicaid department already has missed a July 1 deadline and now is expecting to hire a new, single PBM in January and have it in operation in March.

Since the department in late July released its request for proposals for a single PBM there have been questions about what is — and is not — in it. For example, one requirement could be read to mean that only a few, large providers would be eligible to submit proposals. It says that to be eligible, a company “must demonstrate experience within the last three years as the prime PBM contractor for at least three federal, state, local government or prime healthcare entities where the solution of similar size and scope is currently being or has been implemented.”

Ohio Medicaid covers nearly 3 million people. Between them, CVS Caremark, Express Scripts and OptumRx are estimated to have handled 76% of all prescription drug claims in the United States in 2018.

Some observers have said that not many PBMs would be able to show that in the last three years they have served three clients as big as Ohio Medicaid. So, they say, it’s likely that Ohio would end up with one of the same companies as its single PBM as the three that were involved in the problems the state has experienced over the last five years.

That’s not necessarily true, said Vicki Cunningham, former director of pharmacy services for West Virginia Medicaid. Under her leadership, West Virginia in 2017 scrapped an arrangement similar to the current one in Ohio and increased transparency by “unbundling,” or limiting the scope of the job each contractor does. 

The reforms saved millions, officials said.

“There are lots more PBMs that aren’t commercial PBMs that don’t do bundled work that would qualify” for the Ohio single PBM contract, Cunningham said.

However, it was unclear at a hearing last week of Ohio’s Joint Medicaid Oversight Committee where the duties of the single PBM would leave off and those of department personnel and an “operational support vendor” would begin. 

Ohio Medicaid Director Maureen Corcoran.

Asked for clarification, department spokesman Kevin Walter said that Medicaid Director Maureen Corcoran “was very deliberate about not addressing the specificity you indicate” in asking what tasks would be handled by the support vendor.

In any case, Medicaid won’t say whether it will consider bids from two companies that Attorney General Dave Yost says ripped Ohio off.

In 2019, the attorney general sued OptumRx on behalf of the Ohio Bureau of Workers’ Compensation. The suit, which demands $16 million, says the PBM failed to provide the agency discounts that are  required under its contract. 

Then, in July, Yost sued Express Scripts on behalf of the Ohio Patrol Retirement System on similar grounds. The suit doesn’t specify how much Yost is demanding.

The attorney general has said more legal action against the big PBMs is likely.

For its part, Ohio Medicaid says at this point in the process, it can’t comment on what its request for proposals — a public document — says.

“We are in the quiet period and cannot answer this question,” Walter said in an email.

Quiet periods typically govern communications between potential bidders and the bid-letting agency to prevent anyone from gaining an unfair advantage. 

If the contract for a PBM were to go to a big medical company that the state is simultaneously suing, it wouldn’t be the first time it happened in Ohio. Last year, The Columbus Dispatch reported the state was giving $4 billion worth of tax breaks to drug wholesalers it was suing as part of Ohio’s opioid litigation.


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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.