Medicaid chief stresses transparency, won’t talk about her investments in giant contractors

Ohio Medicaid Director Maureen Corcoran repeatedly stressed the importance of transparency and avoiding conflicts of interest when she testified Wednesday before the legislature’s Joint Medicaid Oversight Committee.

She was speaking about reforms her agency is making to the system it uses to purchase billions of dollars of prescription drugs each year. But Corcoran wasn’t so transparent about another possible conflict of interest: She declined to say how much stock she owned in companies with which she signed more than $22 billion worth of contracts this spring.

The Medicaid director said her lawyers told her not to discuss the matter because the procurement is the subject of a lawsuit.

Among other topics, Wednesday’s hearing focused on the Medicaid department’s plan to move next year to a single drug middleman, or pharmacy benefit manager. It will contract directly with the Medicaid department instead of with managed-care providers as the companies do now.

The big three benefit managers, or PBMs, are CVS Caremark, OptumRx and Express Scripts and they’re estimated to control more than 70% of the national marketplace. Critics say they have used their size and a lack of transparency to gouge taxpayers — a charge they deny.

The Medicaid department’s own research has shown that CVS and Optum marked up the cost of drugs by hundreds of millions in 2017. 

Since PBMs determine how much to reimburse pharmacies for Medicaid drugs, the big three also seem to have built-in conflicts of interest. CVS owns the largest retail chain in the United States and all three own mail-order pharmacies for the most expensive class of drugs.

In other words, the PBMs determine reimbursements for themselves and their competitors. And some competitors suspect that the middlemen have engaged in practices that favor their affiliated pharmacies.

In 2019, the legislature passed laws banning the practice that resulted in the 2017 markups, and it banned clawbacks — PBMs’ practice of reimbursing pharmacies and then months later taking back significant portions of the money.

In testimony Wednesday, two pharmacists and an analyst said that despite the law, the PBMs have been imposing large fees that are the functional equivalent of clawbacks. Those fees can cost taxpayers money by making drugs look like they cost more than they actually did as the Medicaid department sets its pharmacy budget for the coming year — a budget that runs into the billions.

In an email, OptumRx spokesman Andrew Krejci said that his company’s practices didn’t involve clawbacks.

“OptumRx’s solutions enable health system partners to deliver consumers and our clients affordable, convenient access to needed prescription drugs,” he said. “Effective rate contracts are not clawbacks and provide network pharmacies with overall reimbursement predictability.”

Under questioning from Reps. Thomas West, D-Canton, and Scott Lipps, R-Franklin, Corcoran conceded that while PBMs are likely following the letter of the law, they’re probably over-reporting their ultimate expenses to the state.

“Technically, they’re doing what they’re supposed to do,” even if “they’re not satisfying the spirit of” the state’s anti-clawback law. Corcoran told The Columbus Dispatch, adding that the big PBMs might have thus skewed Medicaid costs all over the country.

Greg Lopes, spokesman for the industry group the Pharmaceutical Care Management Association, said the industry is following the law — and its contracts.

“Independent pharmacies voluntarily enter into contracts with pharmacy benefit managers, PBMs, which set reimbursement for pharmacies at fair market values,” Lopes said in an email. “Independent pharmacies more often than not are backed by powerful pharmacy services administrative organizations – the largest of which are owned by drug wholesalers – which are negotiating on the pharmacies’ behalf. In addition, according to the Ohio Medicaid director, PBMs and their contracts follow the letter of the law.”

Corcoran emphasized to lawmakers that by hiring a single PBM, the Medicaid department would solve two problems. Because it will work directly with the department, Medicaid officials will have much more visibility into its work. And, the company, Gainwell Technology, won’t have side businesses that compete with the pharmacies it reimburses.

“The goal for the single PBM, first and foremost, is eliminating conflicts of interest and dramatically increasing the amount of transparency,” Corcoran testified.

But despite past problems, the Fortune Five corporations that own CVS Caremark and OptumRX still got mammoth contracts this year as the Medicaid department tries to refocus its $30 billion-a-year enterprise. And, at least as of last year, Corcoran owned stock in both, according to filings with the Ohio Ethics Commission.

In a process that prevented evaluators from considering prior bad acts, Optum owner UnitedHealth was picked for a share of $22 billion in managed-care business even though the state is suing the company for fraud.

And CVS subsidiary Aetna got a $1 billion contract for children’s behavioral services despite the company’s PBM markups in Ohio — and a whistleblower suit in Pennsylvania accusing Aetna of denying care to children to pad its profits off of Medicaid. Aetna strongly denies the accusation.

Centene also was hired to be a managed care provider even though it agreed in June to pay Ohio $88 million to settle a fraud suit filed against it in March.

Corcoran disclosed that she owned at least $1,000 worth of stock in CVS and UnitedHealth as of last year. 

But she won’t say exactly how much of those stocks — if any — she owned at the time she signed this year’s giant contracts. Nor will she say whether she filed an affidavit disclosing the information as appears to be required by state law.

Despite their committee’s name, members of the Medicaid Oversight Committee didn’t question Corcoran about the matter on Wednesday.

After the hearing, Corcoran said that because a disappointed bidder is suing over the procurement, she couldn’t discuss her holdings in companies involved in the largest public procurement in state history.

“I’ve been advised by our attorneys that since this is an issue that is part of litigation that I am not speaking to it outside of that context,” she said.

She cited the same reason when asked for transparency about another potential conflict: whether Mercer, the consultant that facilitated the procurement, counted any of the bidders among its clients.

Corcoran is expected to be called to testify when a trial over the procurement resumes on Nov. 8.