With big Medicaid changes looming, Ohio pharmacists complain of a lack of details

By: - February 3, 2022 3:50 am

Mint Images/Getty Images.

The Ohio Department of Medicaid plans to radically change the way it does business in July, but a group that helped motivate the reform effort says it hasn’t provided some fundamental details. 

Some members of that group, the state’s community pharmacists, say those details could determine whether they can stay in business — and whether some small towns become pharmacy deserts.

The Medicaid department last summer undertook the largest public procurement in state history when it issued $22 billion worth of five-year contracts to six managed-care companies. One goal of the exercise, officials said, was to reorient the program around individual clients and their health.

The state issued another, billion-dollar contract to Aetna to create a continuum of care for 60,000 Ohio children with complex behavior needs. Under the current, disjointed system, some parents have to turn custody of their over to the state to get them the care they need.

And the reforms seek to radically change the way the Medicaid program pays for prescription drugs.

As far back as 2016, independent pharmacists in Ohio and other states have complained that under-reimbursements for Medicaid drugs were driving them out of business. Medicaid managed-care companies hired middlemen known as pharmacy benefit managers to handle the transactions and pharmacists accused the middlement of starving them while they gouged taxpayers.

The pharmacy benefit managers, or PBMs, say they use their size to negotiate deep discounts from drugmakers, which they say they pass along to consumers. 

But the transactions aren’t transparent, and a state audit found that in 2017 PBMs CVS Caremark and OptumRx charged Ohio taxpayers almost a quarter-billion dollars more for Medicaid drugs than they reimbursed the pharmacists who dispensed them. An investigation by The Columbus Dispatch also found that CVS was sending independent pharmacies letters acknowledging that reimbursements were down and offering to buy them out.

After several attempts at legislative fixes, the Medicaid department is now trying to increase transparency by making the drug middleman — the PBM — work directly for it. Instead of being able to hide behind a contract with a managed-care organization, the new arrangement will give the state total visibility into discounts collected, fees charged and reimbursements made by the new, single PBM.

Instead of being based on some non-transparent, ever-changing reimbursement schedule, the Medicaid department is now trying to come up with a publicly available list of prices it will pay for medicine, plus a dispensing fee to cover pharmacists’ costs. 

Problem is, some pharmacies say, the state still hasn’t said what price list it will use or what dispensing fee it will pay.

“We know that what we’ve been paid over the last five years is unsustainable, based on all the pharmacies that have had to close,” said Lynne Fruth, president of Fruth Pharmacy, a chain that operates small-town pharmacies in Ohio, Kentucky and West Virginia. 

Fruth shuttered its Nelsonville pharmacy operation in 2019, saying that 50% of its clientele were Medicaid patients and paltry reimbursements from the program made it impossible to stay in business.

Now Fruth is frustrated that she can’t get information from the Medicaid department that will help her allow the company’s 10 other Ohio pharmacies to keep operating.

“The biggest thing is not being able to get anybody to tell us what (reimbursements) are going to be,” Fruth said. 

The Medicaid department didn’t respond to questions before this story published, but on Thursday, spokeswoman Lisa Lawless described the process the department has in mind.

“Reimbursement for ingredient cost will include (the National Average Drug Acquisition Cost database) as a pricing metric, but we will primarily be utilizing the Ohio Average Acquisition Cost (Ohio AAC), which will be a survey-based benchmark for drug reimbursement,” Lawless said in an email. “This will be provided by the Pharmacy Pricing and Audit Consultant, Myers and Stauffer, which has significant experience in state AAC programs as well as performing NADAC surveys for CMS nationally.”

Fruth expressed skepticism that such a process could be completed by the time the new system is set to go live.



Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.

Marty Schladen
Marty Schladen

Marty Schladen has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017. He's won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.