Ohio Medicaid Director Maureen Corcoran (left) before the start of the Joint Medicaid Oversight Committee Meeting at the Ohio Statehouse, October 27, 2021, in Columbus, Ohio. (Photo by Graham Stokes)
Can Ohioans be confident that a consulting firm paid almost $10 million by taxpayers last year to assist in a $22 billion procurement didn’t have conflicts of interest?
The firm hasn’t answered whether any of the Medicaid managed-care bidders were also its clients. And Ohio officials don’t appear to have much interest in digging out or publicizing that information.
After the New York Times last week reported that a separate global consulting firm appeared to have rampant, undisclosed conflicts with the federal government and with opioid makers, the Ohio Department of Medicaid last week didn’t answer directly when asked if its consultant should disclose its clients. The consultant, Mercer, wouldn’t say, either.
The Medicaid department last year hired the company to facilitate a process by which it hired six managed-care firms for the next five years. Controversially, the process Mercer set out prohibited evaluators from considering that some of the companies had been accused of defrauding Ohio taxpayers. One of the successful bidders had just agreed to pay Ohio $88.3 million to settle fraud claims, and another is still being sued by the state on claims that it defrauded taxpayers of $16 million.
While the process didn’t consider allegations of fraud, it asked for pitches involving things that are less tangible.
“We wanted resourcefulness,” Ohio Medicaid Medical Director Mary Applegate testified last year during litigation over the procurement, describing what the department wanted to hear from bidders. “We wanted patient-centeredness. We wanted a new paradigm of what ‘managed care’ means.”
Federal rules around rate setting are now so strict that there is little competition on price during Medicaid managed-care procurements, said Kip Piper, a former Wisconsin Medicaid director and former senior advisor at the U.S. Centers for Medicare and Medicaid Services. Instead, the procurements tend to be beauty contests in which the companies with the most resources win because they put together the slickest packages, he said.
“It’s pretty close to the time that procurements of Medicaid plans actually provide no value,” Piper said in an interview last month, adding, “What you often end up getting is a huge team of people — it’s staggering how these big proposals are put together — and it’s a huge industry putting together these proposals. Whoever writes the best proposal wins.”
Indeed, two of the winners of multi-billion-dollar deals — the same two that have been sued by the state — are among the 25 largest corporations by revenue in the United States.
Meanwhile, Mercer has refused to say whether any of the bidders does other business with it. As part of last year’s litigation, the Medicaid department eventually produced a memo addressing the possibility of Mercer conflicts, but Franklin County Common Pleas Judge Julie M. Lynch allowed the department to redact the names of Mercer’s clients.
Seeing those names seemed to take on new urgency last week.
The New York Times reported that the U.S. House Committee on Government Oversight and Reform is preparing a report on conflicts that a separate consultant, McKinsey & Company, had as it simultaneously consulted for opioid manufacturer Purdue Pharma and the U.S. Food and Drug Administration.
Despite claiming it had strict firewalls to protect against conflicts, the firewalls appear to have been porous at best.
Documents show that some of the same McKinsey employee consulted with Purdue Pharma — which has paid out billions over its role in the opioid epidemic — while also consulting with the U.S. Food and Drug Administration about how it approved new drugs, some of which Purdue wanted to bring to market.
The apparent conflicts didn’t end there.
McKinsey in some instances watered down recommendations to its FDA clients after objections from consultants for its pharma clients, the report said. And McKinsey even boasted of its access to FDA officials through its federal contracts when pitching services to pharmaceutical clients, the documents show.
In a statement, Committee Chairwoman Carolyn Maloney, D-New York, said the investigation shows that the consulting industry is sorely in need of transparency.
“The Oversight Committee’s investigation is shining a spotlight on the unregulated and secretive world of private consulting firms like McKinsey that create conflicts of interest by working for both the federal government and regulated industries,” she said. “Today’s report shows that at the same time the FDA was relying on McKinsey’s advice to ensure drug safety and protect American lives, the firm was also being paid by the very companies fueling the deadly opioid epidemic to help them avoid tougher regulation of these dangerous drugs.”
In light of the seemingly rampant conflicts of interest at McKinsey, wouldn’t it make sense for Ohio Medicaid to release a client list from Mercer, the consultant it paid $10 million to help it dole out $22 billion worth of contracts?
Ohio Attorney General Dave Yost was one of 47 state attorneys general to sue McKinsey over its role in encouraging Purdue to “turbocharge” opioid sales as the epidemic killed 450,000 Americans. The case against McKinsey netted a $600 million settlement.
In an email last week, Yost said the McKinsey conflicts were unsurprising.
“I was disturbed — but not shocked — to read about these conflicts in the prescription drug space,” he said. “There’s a huge potential for conflicts of interest in health care, especially given the rapid consolidation and vertical integration of systems.”
Yost added that, “We are witnessing the development of a system that works against and not for Americans and it’s a system crying out for significant reform.”
But Yost referred questions about Mercer to the Medicaid department. Asked whether Medicaid Director Maureen Corcoran believes Mercer should disclose its clients, spokeswoman Lisa Lawless in an email said, “Medicaid’s robust protections in the procurement were heard by the court during last fall’s trial related to a challenge by one losing bidder.”
Then she quoted a lengthy passage from a ruling Judge French wrote after denying a motion to publicly name Mercer’s clients. In it, the judge expressed trust in Mercer’s firewalls.
“The evaluators received extensive training on how to review applications from Mercer,” it said. “The entities that assisted Medicaid with the (managed care) procurement walled off their procurement teams from other departments and individuals.”
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