Health care giant acknowledges Ohio suit, says more could come from other states

The largest Medicaid contractor in the United States on Tuesday acknowledged to investors that Ohio has sued it, accusing it of improperly inflating its bills to the health system for the poor. 

The company, Centene, also said more such suits could be filed by other states. Because it relies heavily on government revenue, the prospect of state litigation could pose a big risk to the company.

Ohio Attorney General Dave Yost in March filed suit against Centene, which does business with 31 state Medicaid departments. The case accuses the company of using its managed-care organization and drug-middleman subsidiaries to improperly bill Ohio taxpayers for tens of millions of dollars. 

The suit comes after an analysis of 2017 Medicaid data showed that Centene and CVS Caremark charged far more to administer prescription drugs than the state’s other four Medicaid managed-care providers. Also, Centene’s drug middleman was paid $20 million for services that CVS said it had provided.

Suspecting that the system has been abused by drug middlemen known as “pharmacy benefit managers,” the Ohio Department of Medicaid is implementing sweeping reforms to the way it handles its $4 billion in annual drug spending. Earlier this month, as it re-let its managed care contracts, the department paused its consideration of Centene’s bid because of the lawsuit.

The corporation has strongly denied the charges. On a quarterly earnings call Wednesday, Centene Chairman, President and CEO Michael Neidorff sought to explain the suit to investors.

“I would like to take a moment to comment on the situation in Ohio,” he said, according to a transcript of the call. “We are still (in) an active (bidding) process, where we finished second out of 11 bidders, according to a scoring summary released by the Ohio Department of Medicaid. 

“Regarding the legal and regulatory landscape, Centene has been clear that we maintain the claims (in the lawsuit) to be unfounded. For additional information about our position on this matter, I want to direct you to our website for links to our court filings. We look forward to answering any questions from our governmental partners regarding this issue and remain committed to the highest levels of quality and transparency and how we serve our state partners.”

After Yost announced the suit against Centene, Mississippi officials told the Daily Journal newspaper that they had retained the same outside law firm as Ohio and that they were considering similar litigation.

The Capital Journal has since uncovered contracts between that firm — Ridgeland, Miss.-based Liston & Deas — and attorneys general in Kansas and Arkansas.

Centene shrugged off the news.

“A Mississippi-based personal injury law firm is welcome to pursue frivolous lawsuits and chase commission fees by investigating our pharmacy benefits programs,” a spokeswoman said in an email. “Centene stands by the value we provide to our state partners.”

But in its quarterly earnings filing with the U.S. Securities and Exchange Commission, the company acknowledged Ohio’s complaint and said other states could follow suit.

The SEC filing said that the Ohio lawsuit claims breach of contract and illegal conduct, “including among other things, by (i) seeking payment for services already reimbursed, (ii) not accurately disclosing to the Ohio Department of Medicaid the true cost of the PBM services and (iii) inflating dispensing fees for prescription drugs.”

It adds that Ohio is seeking reimbursement, damages, penalties and possible termination of the state’s contract with Centene’s managed-care organization, Buckeye Health Plan.

“Other states are reviewing the practices of (pharmacy benefit manager) service providers, including us, and could bring claims against us,” the filing said.