Additional corporations reported to be facing states’ drug-middleman probes

More states are investigating more companies regarding their conduct in the multi-billion dollar business of managing drug transactions, the Wall Street Journal reported Tuesday.

The reporting comes after the Capital Journal in April reported that attorneys general in Ohio, Kansas, Mississippi and Arkansas were investigating health care giant Centene. Ohio Attorney General Dave Yost has sued the corporation, accusing it of using its Medicaid managed-care operation and two of its pharmacy benefit managers to overbill taxpayers by tens of millions of dollars.

Centene denied any misconduct.

Georgia, Oklahoma, New Mexico and the District of Columbia are also looking at the conduct of Centene, UnitedHealth Group and CVS Health, the Journal reported. While the paper didn’t detail what the states are investigating, the issues are likely similar to those alleged in Ohio.

In early 2019, Yost sued UnitedHealth subsidiary OptumRx, claiming that the pharmacy benefit manager violated its contract and overcharged the Ohio Bureau of Workers Compensation by $16 million between 2015 and 2017.

Last summer, Yost sued another leading pharmacy benefit manager, Express Scripts. The suit didn’t list a specific dollar amount, but it said that since 2010 it had failed to deliver on guaranteed discounts for drugs, misclassified drugs in order to charge higher prices, overcharged for generic drugs and didn’t disclose payments it received in connection with its work for the state agency.

Pharmacy benefit managers may not cut a high profile. But the three biggest — CVS Caremark, OptumRx and Express Scripts — control more than 70% of a marketplace that is estimated to be worth more than $450 billion a year.

The companies contract with government agencies and programs such as Medicare and Medicaid, as well as with private insurers. Among their functions, they decide which drugs get preferred treatment, negotiate rebates with manufacturers and they decide how much to reimburse pharmacists.

They have been accused of working behind a veil of secrecy to inflate drug prices and drive out competitors — including in lines of business where their parent companies directly compete, such as retail pharmacy. 

Those concerns have only heightened since 2014, as the companies owning the three biggest PBMs have merged with large health insurers: Aetna, Cigna and UnitedHealth. A bipartisan group of U.S. senators now is trying to force the Federal Trade Commission to investigate whether the mega-corporations are using market power to inflate health care costs and pad profits.

While CVS is reported to be the subject of scrutiny, it’s unclear whether it is the target of possible litigation in Ohio. That’s despite the fact that it’s been at the center of controversy surrounding the state’s Medicaid program.

As part of a lengthy investigation of pharmacy benefit managers, The Columbus Dispatch in 2018 obtained confidential reimbursement information from scores of Ohio pharmacists. The resulting analysis showed that the companies were paying pharmacists far less for drugs than they were billing taxpayers.

In response, the state Medicaid department obtained all reimbursement data and determined that in 2017, pharmacy benefit managers billed taxpayers $244 million more for generic drugs than they reimbursed the pharmacies that had purchased and dispensed them.

Reforms in response to the reporting now have a single benefit manager contracting directly with the state and Ohio suspending its contract with Centene. But despite the fact that CVS handled 89% of Ohio Medicaid’s generic drug transactions in 2017, the state has not taken any action against the company, which strongly denies wrongdoing.

“We can’t confirm or deny the existence of an investigation,” a spokesman for Yost said in an email. “We are reviewing all PBM practices in Ohio.”