As new Medicaid prescription program nears, some Ohio pharmacists are worried

By: - August 9, 2022 4:00 am

File photo by Justin Sullivan/Getty Images.

Ohio’s community pharmacists are still worried that the state Medicaid program might drive them out of business — and deprive some communities of access to medicine.

After years of complaints about under-payment and possible profiteering off of prescription drugs, the legislature in 2019 directed the Department of Medicaid to undertake a bold reform

Instead of dealing with several pharmacy middlemen who now are managing billions in drug transactions behind a veil of contracts they hold with insurance companies, the law requires a single middleman to contract directly with the state. That way, the thinking goes, state officials will have an unobstructed view of what’s happening to the huge amounts of tax dollars going to pay for Medicaid drugs.

But with the new system set to go live on Oct. 1, some of the state’s community pharmacists are worried that it won’t address some problems they hoped it would. And those are the people who raised the alarm in the first place.

“I keep trying to give them the benefit of the doubt,” Nancy Wharmby, president of Medicine Center Pharmacy, said in an interview Tuesday. “I really believe they started this process with the best of intentions and then it just started to spiral out of control and now they have a mess and they don’t know how to get it back under control again.”

Medicine Center owns four retail pharmacies in Northeast Ohio and as with most other pharmacies in the state, a large amount of its business comes from the state Medicaid program. 

Statewide, 3.39 million are enrolled in Medicaid, which provides health care to the poor. That’s between one-quarter and one-third of the state’s 11.85 million residents. 

One aspect of the rollout of the new system that has the state’s community pharmacists concerned might be at least partly unavoidable with any big change: It’s been messy.

Wharmby described how the original date to go live with a single middleman — or pharmacy benefit manager — was July 1. Even before then, pharmacies were getting heavy pressure from the state agency and from some of their drug-purchasing groups to sign contracts or risk being dropped from a program that represents a large amount of their business.

After the Medicaid department moved back its go-live date, Medicine Center signed its contract. Then on July 15 it received an email from the Medicaid department saying it had until July 22 to propose revisions.

That struck Wharmby as unfair.

“We sent an email and said ‘What the heck?'” she said. “We thought this was a level playing field and that everybody was signing or not signing the same contract. Now we’ve found out that now that we already submitted our contract that we could have negotiated for better terms.”

Wharmby said the department allowed her company to propose revisions and those were accepted. But she later learned that other pharmacies are still cutting deals that are perhaps better. To her, that raises questions about the transparency of the process and about the ability of Gainwell Technologies, the single pharmacy benefit manager, to administer so many different contracts at the same time.

There are some specific provisions still in at least some contracts that have pharmacies worried they’ll continue to lose money serving some Medicaid patients.

Pharmacy benefit managers, or PBMs, have huge influence when it comes to drug transactions. They negotiate rebates with manufacturers, decide which drugs are covered, contract with pharmacies and determine how much to reimburse them for the medicines they dispense.

At least as far back as 2016, Ohio community pharmacists complained that the then-dominant PBM in Medicaid, CVS Caremark, was under-reimbursing them for drugs. Meanwhile, the company had an apparent conflict because it was determining reimbursements not only for those pharmacies, but also those owned by its parent company, CVS Health.

There are also widespread complaints that PBMs operate largely in the dark, so it’s hard to know how much they’re really making. 

Amid the outcry, the Medicaid department in 2018 got CVS Caremark and OptumRx to cough up all their data from 2017. An analysis determined that they charged taxpayers $224 million more for drugs than they paid pharmacies — an amount that the analyst concluded was three to six times the going rate.

Now, under the new arrangement with a single PBM, Ohio’s community pharmacists are still worried that poor terms from Medicaid could run them out of business.

They were worried when a first draft of the contract gave Gainwell 90 days to reimburse them for drugs, while the Medicaid department was to pay Gainwell every week. That’s an unconscionable amount of cash to allow the state’s contractor to hold, interest-free, for three months, they said, explaining that many didn’t have the cashflow to sustain it.

Two pharmacies told the Capital Journal that they were able to negotiate that period down to 30 days, but it’s unclear whether all pharmacies signing contracts have.

Medicaid spokeswoman Lisa Lawless didn’t respond directly to questions about this and other matters. Instead, she sent along answers to frequently asked questions about pricing under the new system.

“Gainwell claims will be paid on a weekly payment cycle,” it said. “While federal law requires claims payment for clean claims within 90 days, nearly all the claims can and will be processed much more quickly.”

Perhaps the biggest concern community pharmacies have is that under the new system dispensing fees still won’t cover what they say it costs to fill a given prescription. Dispensing fees are what it costs to pay overhead, for the bottle and label, for a pharmacist to consult with patients and things like that.

Wharmby said that if anything, those costs are higher when it comes to Medicaid patients.

“I think on many levels that population has the greatest needs,” she said. “They frequently require a little bit of a higher touch. Whether it’s making sure they have a clear understanding of their medications. Whether it’s making sure they have access to their medications — possibly delivering it to them or packaging it differently. The unique thing about that population is that they seem to need a little bit of a higher touch, yet since 2016 and forward, that reimbursement has been on the decline and frequently (serving those patients is done) at a loss.”

Lynne Fruth is president of a chain of pharmacies operating in Southeastern Ohio, an area with a high proportion of Medicaid patients. The share of Medicaid patients at Fruth Pharmacies has gone from 36% in 2019 to 45% now, Fruth said. She added that it costs well over $12 to dispense each prescription at many of those stores. 

Meanwhile, under the new system, pharmacies will get Medicaid dispensing fees in three tiers that are based on a store’s volume and the percentage of prescriptions that are for Medicaid. They range from $7.64 for the lowest tier to $10.50 for the highest — a tier that Fruth said none of her company’s stores qualified for.

“We’re losing more money on Medicaid because we’re filling more Medicaid prescriptions,” Fruth said last week. “Right now, we’re looking at our stores.”

She explained that her company, which is based in West Virginia, has been evaluating whether it can afford to keep some of its Ohio stores open if reimbursements and dispensing fees don’t improve. And it’s not just a matter of keeping a small-town business afloat. 

Especially for the poor — who are more likely to face challenges like not having a car or being unable to pay for gas — having a nearby place to get medicine is vital. But a 2019 investigation by The Columbus Dispatch found that the number of “pharmacy deserts” in sparsely populated sections of Ohio are multiplying. 

One potential desert is in Albany, 10 miles southwest of Athens, where Fruth is the only pharmacy.

“We’re the only place where you can get a few groceries, get your prescriptions and whatnot,” Fruth said.

If it closes, people there will likely have to make a 15-minute drive — if they’re able — to get their prescriptions filled in Athens.

However, Fruth said, the state senator representing that district seemed less than concerned when she told him that if Ohio Medicaid doesn’t improve its terms, she’d be forced to close that and another pharmacy in his district.

Sen. Frank Hoagland, R-Mingo Junction, represents a district that sweeps along the Ohio River from north of Steubenville to south of Pomeroy, taking in some of the state’s poorest communities. The 17.4% of residents living in poverty exceed the state average by 3.4 percentage points and the 16.4% on Medicaid exceed the already-high state average by half a point, according to the Center for Community Solutions.

Yet, according to Fruth, Hoagland thinks it’s a bad idea for a business to cater to that part of his constituency.

“I get on the phone with him and I’m going through all this stuff and he’s not saying much. Maybe he doesn’t believe people need Medicaid,” Fruth said, adding that then, “He said something like, ‘You should not be running your business based on getting paid by Medicaid. That’s not a good business model.’ And I said, ‘Sen. Hoagland, frankly that insults me.'”

Hoagland’s office and a spokesman for the Senate Republican Caucus didn’t respond to requests for comment.

“I’ve never met anybody I had less respect for,” Fruth said of Hoagland.

As with reimbursement periods, the Medicaid department didn’t respond directly when asked why dispensing fees won’t meet the levels pharmacies reported as part of the department’s survey.

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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.