Attorney General seeks financial info from Medicaid contractors

Investigation might focus on possible law violations

By: - March 11, 2022 5:11 pm

Ohio Attorney General Dave Yost. (Photo by Justin Merriman/Getty Images)

In the past month, Ohio Attorney General Dave Yost has sought financial information from the state’s five managed-care contractors, documents received in response to an open-records request show. 

The AG won’t discuss ongoing investigations, but he might be looking into whether some practices by subcontractors who manage pharmacy benefits violate state law or federal regulations.

At issue seem to be practices the pharmacy benefit managers use to initially reimburse pharmacies a certain amount then later claw back part of the money — and how all that money’s accounted for. If the probe results in litigation, it could be a huge deal because those practices are widely used in the prescription marketplace by some of the largest corporations in the United States.

Medicaid serves as government health provider for 25% of Ohioans. But under its managed-care system it’s also big business. In 2020, it paid each of its managed-care companies at least $1.5 billion and one, Dayton-based CareSource, more than $7 billion to administer care.

Those companies have hired subcontractors CVS Caremark, OptumRx and Express Scripts to handle the programs’ prescription drug benefit, which itself is a big business, worth more than $3.5 billion a year.

Ohio pharmacists have long complained that the reimbursements they receive for medicines they dispense under the Medicaid program often don’t meet their expenses. And they’ve said they’re losing increasing amounts of money when the big pharmacy benefit managers, or PBMs, take back portions of their reimbursements weeks or months after the sale.

One Ohio pharmacist said he didn’t want to be named for fear of retaliation by the big PBMs, which represent more than 70% of Americans who have some kind of insurance. But in December he shared an internal analysis indicating that in 2020 OptumRx clawed back almost 43% of his profit from Medicaid transactions.

Top executives with Fruth Pharmacy, a chain in Southeast Ohio, West Virginia and Kentucky, estimated that in 2020 the big PBMs clawed back $36,000 of its reimbursements from Ohio Medicaid transactions — from which they were already finding it difficult to stay in business.

The PBMs have maintained that their practices are part of their work to ensure that drug costs are minimized. None of the three could immediately be reached for comment on Friday, but in December an OptumRx spokesman said, “We follow all Ohio Medicaid requirements, including contracting and reporting, to help ensure beneficiaries and the state Medicaid program have access to affordable prescription drugs.”

A possible problem for the PBMs is that in 2019 Ohio passed a law that seems to outlaw the vast majority of clawbacks, or “post adjudication adjustments.” The only exceptions it allows are for mistakes found as part of an audit or if there was a technical billing error.

And there’s another potential problem. If the PBMs are clawing back large amounts of money and it’s not being reported to Medicaid officials, they could be violating a federal rule meant to ensure that Medicaid contractors aren’t pocketing too much in the form of profits and administrative expenses.

The measure, known as the “medical-loss ratio” goes to the heart of managed care. The idea is to try to use the profit motive to create efficiencies, but keep it from getting out of hand.

In Ohio, the minimum medical-loss ratio a managed care company can have is 85%. That means a company must spend at least 85% of the money it gets from the Medicaid department on patient care, quality improvement and fraud prevention.

But if PBMs are paying out huge amounts in pharmacy reimbursements only to take back big portions of it, on which side of the medical-loss ratio is the reclaimed money being counted? The patient-care side, or the profit side?

In October, Ohio Medicaid Director Maureen Corcoran told the legislature’s Joint Medicaid Oversight Committee that she didn’t know, but would investigate.

In February, she told The Columbus Dispatch that so far in the department’s investigation, it had been unable to untangle the matter. Corcoran also seemed ready to forget the issue unless her department found something horrible.

“If as a result of this we find that there’s what I call ‘a dead body in the road’ … we’ll do something about it,” she told the paper, adding that if it just found “a stone in the road” she’d likely move on to an overhaul the department has been working on for the past two years.  

The attorney general’s office, on the other hand, seems intent on getting the numbers.

In response to an open-records request, it provided letters sent on Feb. 11 to the state’s five Medicaid managed-care providers and a sixth company that serves patients on both Medicare and Medicaid. It sent out an additional set of letters on Feb. 28 to clarify the request.

In reference to their business with the big three PBMs since the beginning of 2018, the initial letters requested “Reports and data showing or referencing post-adjudication “clawbacks,” performance or quality fees or payments, or other post adjudication adjustments regardless of how characterized.”

Yost’s investigations of PBMs have led to important litigation in the past.

In 2019 he sued OptumRx, accusing it of defrauding the Ohio Bureau of Workers Compensation of $16 million. In 2020, he sued Express Scripts on behalf of the Ohio Highway Patrol Retirement System. Both suits are ongoing and the companies deny wrongdoing.

In March 2021, Yost sued Centene, the owner of one of Ohio’s managed-care contractors, over practices used by pharmacy benefit managers it owns as they worked in conjunction with CVS, which was not accused of wrongdoing. In just three months, Centene announced that it wasn’t admitting to doing anything wrong, but it would pay $88.3 million to settle Ohio’s claims — and it would set aside more than $1 billion more to settle similar claims in 21 other states, none of which had sued.



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.