After years of complaints by community pharmacies, Ohio’s largest Medicaid managed-care company has announced a huge overhaul to the way it reimburses them for prescription drugs.
The issue might sound technical, but it goes to the heart of drug pricing and whether independent, small-town pharmacies can remain viable. In fact, it played a big role in a case that was argued earlier this month before the U.S. Supreme Court.
Dayton-based CareSource last week announced that Express Scripts, its pharmacy-benefit manager, would scrap the non-transparent process it was using to reimburse pharmacies for generic drugs and replace it with one based on a public index.
“This move magnifies the importance of our commitment to local, independent pharmacies by providing both transparency and stability to our critical access providers in order to help us achieve the highest quality of patient care for our members, particularly in rural and underserved patient populations,” Steve Ringel, CareSource Ohio Market President, said in a statement.
CareSource is by far the largest of the five companies that contract with the Ohio Department of Medicaid to run the vast majority of the state’s $27 billion-a-year program, which uses federal and state funds to provide healthcare to more than 25% of Ohioans.
The managed-care companies, in turn, contract with pharmacy-benefit managers, or PBMs, to handle more than $3 billion a year in prescription drug transactions. The PBMs serve as middlemen, handling such tasks as reconciling claims, negotiating rebates from drug makers and reimbursing pharmacists.
Huge PBMs such as Express Scripts, CVS Caremark and OptumRx have been accused of using opaque tactics to engage in non-competitive practices.
One practice under scrutiny is the use of maximum-allowable-cost, or “MAC,” lists to determine how much to reimburse pharmacists for Medicaid drugs that the pharmacists have already purchased from wholesalers. PBMs generate many such lists internally through a process they claim is objective, but a rare peek behind the curtain last year raised serious questions about whether that’s actually the case.
A state study prompted by an investigation by The Columbus Dispatch found that in 2017, the three big PBMs charged the state almost a quarter-billion dollars more for generic drugs than it paid the pharmacists who dispensed them. And that doesn’t count profits the companies might have reaped from more expensive brand-name and specialty drugs.
Community pharmacists in Ohio and elsewhere have for years been complaining that they’re losing money through practices such as these and some are going out of business. In some areas, that has created “pharmacy deserts” where access for the poor and elderly becomes much more difficult.
To combat the phenomenon, Arkansas passed a law forbidding the MAC pricing system for generic drugs and the PBM industry sued. That’s the issue now before the U.S. Supreme Court.
But in Ohio, CareSource is voluntarily doing what the Arkansas law forces PBMs to do: use a public-pricing list to set reimbursements to pharmacists. Known as the National Average Drug Acquisition Cost, or “NADAC,” list, it averages what pharmacies pay to acquire drugs.
It’s not a perfect reflection of the marketplace because it doesn’t account for rebates pharmacists get from wholesalers. But an observer said that it’s as close to objective pricing as one can get under the current system. He added that while NADAC might work somewhat to the advantage of pharmacists, they also are disadvantaged by Medicaid dispensing fees that usually don’t cover their costs.
The news that CareSource would make its PBM use the new reimbursement system was welcomed by the organization that represents Ohio’s community pharmacists.
“It’s no secret that pharmacists in Ohio have been looking for someone to step forward and redesign the pharmacy benefits model for the better,” Ernest Boyd, Executive Director of the Ohio Pharmacists Association, said in a statement. “Pharmacy is complicated, and it takes a lot of work and motivation to unwind it and fix it. The Ohio Pharmacists Association applauds CareSource for rolling up their sleeves and building solutions for local providers who serve some of the most vulnerable populations.”