Ohio hires Medicaid prescription drug watchdog

As it makes sweeping reforms to the way it handles managed care for the state’s $24 billion Medicaid program, Ohio on Wednesday announced that it had hired a company to monitor its progress. 

The Department of Medicaid announced that it had hired the Medicaid and Medicare auditing firm Myers and Stauffer to be its pharmacy pricing and auditing consultant.

The topic might sound dry as dust, but huge amounts of money are at stake, and those dollars are meant to provide health care to the poorest 25% of Ohioans.

“Ohio Medicaid will work hand-in-hand with Myers and Stauffer to create rigorous checks and balances needed to make sure we are using dollars wisely,” Ohio Medicaid Director Maureen Corcoran said in a statement.

Those rigorous checks and balances don’t seem to have always been in place.

Until this year, five managed-care organizations contracted with the state to handle the Medicaid benefit. The organizations, in turn, contracted with middlemen called “pharmacy benefit managers” to administer billions in prescription-drug benefits.

The pharmacy benefit managers, or PBMs, worked behind a veil of secrecy to determine how much they would bill taxpayers for drugs and how much they would reimburse the pharmacists who had bought and dispensed them.

Ohio’s community pharmacists found one arrangement particularly suspicious. CVS Caremark was determining the pharmacists’ reimbursements as PBM to four of the five Medicaid managed-care plans. At the same time, the company’s retail pharmacies were in direct competition with them.

In late 2017, many Ohio pharmacies reported that their CVS Caremark reimbursements had dropped so low that they were losing money. Then the retail branch of CVS sent them letters bemoaning declining reimbursements and saying that “mounting challenges like these make selling your store to CVS Pharmacy an attractive and practical option.”

CVS denied that it was trying to drive out retail competition, but skeptical pharmacists dubbed the tactic they believed CVS was employing “squeeze and buy.”

Later in 2018, an analysis of reimbursement data commissioned by the Medicaid department determined that in 2017 CVS Caremark and OptumRx — UnitedHealth’s PBM — billed the state almost a quarter-billion dollars more for generic drugs than they paid the pharmacists who dispensed them.

In its statement Wednesday, the Medicaid department said those payments “could not be verified or accounted for.”

Also stemming from the 2018 data analysis were revelations that PBMs under one managed-care organization might be double-billing the state for $20 million in pharmacy services. The companies involved have denied that was the case, but Ohio Attorney General Dave Yost last month sued healthcare giant Centene in connection with the matter.

The Medicaid department made some major reforms in response to the problems. 

Last week, when it announced that it had re-procured managed-care contracts, it left Centene’s managed-care company off the list because the state is suing Centene.

And early this year, the Medicaid department hired Gainwell Technologies to function as the state’s only PBM. And because the company is contracting directly with the state, it will have to give the Medicaid department access to its data — instead of hiding behind its contract with a managed-care organization to keep it secret as PBMs have done in the past.

That’s where the contract announced Wednesday comes in. Myers and Stauffer will function as the Medicaid department’s watchdog.

The company will work with the department “to establish pharmacy prices and conduct fiscal oversight of the single pharmacy benefit manager,” the Medicaid department said. The “oversight is designed to eliminate potential… conflicts of interest, prevent prescription drug steerage, and guard against other potential financial mechanisms that could reduce public confidence, increase cost, and obscure visibility into the operations of the program.”

Myers and Stauffer also “will be responsible for determining reimbursement methodologies, conducting dispensing and ingredient acquisition assessments, and maintaining accurate and up-to-date pharmacy rates,” the statement said. 

The plan “is designed for transparency and accountability,” Corcoran said.  Myers and Stauffer “will bring visibility to the financial influences and levers associated with pharmacy administration, strengthening Ohio’s ability to fully leverage the pharmacy benefit program for the good of the people we serve and the financial best interest of the state.”