Ohio AG says state owed $15.8M from pharmacy benefit manager

The Ohio Attorney General is arguing the state is owed $15.8 million from a company that manages pharmacy benefits for Ohio Bureau of Workers’ Compensation — an accusation that the company says is “without merit.”

The allegation comes amid growing tensions between Gov. Mike DeWine’s administration and pharmacy benefit managers, following a state report that showed the companies charge the state far more than they pay pharmacists. Most of the scrutiny has fallen on the companies that handle pharmacy benefits for the private Medicaid plans in Ohio, though the companies also manage prescription benefits for Ohio Bureau of Workers’ Compensation and other government and private employers.

Catching up? Read our latest pharmacy reporting here:

• Pharmacy middlemen made $223.7M from Ohio Medicaid

• Pharmacy middlemen charge Ohio Medicaid 31 percent mark up for generics

• High cost of prescriptions puts some drugs out of reach

• With small pharmacies disappearing, Medicaid cuts seen as culprit

Ohio Attorney General Dave Yost said Tuesday that he intends to go to mediation with the pharmacy benefit manager, OptumRx, seeking to recoup $15.8 million.

Yost claims that OptumRx failed to provide contractually agreed discounts on drugs. He said his office found their contract requires the company to pass on any savings for lower prices to the BWC and he claims the company waited a month or longer before passing on the savings.

“They broke the contract. They took our money. I want it back,” Yost said.

OptumRx, said in a statement that “We believe these allegations are without merit and are working with the State to resolve the Bureau’s concerns in accordance with the terms of our contract.” The company said it has delivered more affordable prescription medications for the Ohio Bureau of Workers’ Compensation and Ohio taxpayers.

BWC’s contract with OptumRx requires the two organizations mediate any disputes before bringing litigation, Yost said. Yost said OptumRx overcharged the state agency for generic drugs purchased between Jan. 1, 2015 and Oct. 27, 2018. The BWC’s contract with OptumRx expired in October, and BWC has contracted with a different company to manage its pharmacy benefits going forward.

MORE: Ohio Medicaid lifts restrictions on costly hep C drugs

DeWine’s administration is still reviewing whether state agencies were overcharged for drugs by pharmacy benefit managers. Yost stated he has hired outside counsel and experts to review pharmacy benefit manager data and could potentially pursue litigation.

Yost said in a separate statement from his office that he “will not hesitate to pursue overcharges and fraudulent conduct. This is an important first step in this process.”

Pharmacy benefit managers are commonly used by insurance companies to negotiate deals on drugs and process pharmacy claims. They charge Ohio Medicaid plans for the cost of drugs and they pay pharmacists for the prescriptions. The companies also have additional ways of making money, including fees and rebates.

Critics have said there wasn’t enough transparency about how much taxpayer money flows through these middlemen makes its way to pharmacists. For some drugs, pharmacists say they only get paid a small portion of the price billed to Medicaid plans and the rest is kept by the pharmacy benefit managers.

Data released last year showed for the first time how the pharmacy middlemen managed $2.5 billion in money for Ohio Medicaid. The report, prepared by a consultant, showed the companies retained $223.7 million last year of the money they billed Medicaid. CVS Caremark in 2017 it kept 8.7 percent or the payments it received, or $197.3 million. OptumRx kept 9.4 percent, or $26.4 million.

MORE: Ohio to rebid costly private Medicaid contracts

The same report also said Medicaid saved $145 million under the privatized system compared to the former system where the state insurance program for the poor directly paid fees for services.

Major changes have already happened. Instead of marking up the cost of prescriptions, starting Jan. 1, pharmacy benefit managers that work with private Ohio Medicaid plans charge a transparent administration fee and then bill the plans the same cost they paid pharmacists for the drugs.

Unmatched coverage

In order to give our readers the best information from which to make health care decisions, the Dayton Daily News spent much of 2017 digging into what drives prescription drug prices with a multi-part series. It exposed issues of transparency in pharmacy benefit manager contracts, the impact to consumers of pharmacy clawbacks and industry forces pushing dozens of independent pharmacies out of business.