Hiring new watchdog wraps up Ohio PBM reforms
Bedeviled for years by pharmacy benefit managers making hundreds of millions from Ohio, the state Medicaid department completed its revamp of the entire PBM setup Wednesday by awarding a contract costing 25% less than estimated.
Indianapolis firm Myers and Stauffer will be paid an average of $1.5 million a year under a two-year pact that has an additional six optional years. The price tag if the deal remains in place for the entire eight years would be $12 million.
The new firm – which already manages the National Average Drug Acquisition Cost database for the federal government – essentially will act as a watchdog on a state-run PBM.
The restructuring is expected to take effect in early January. It replaces a setup that has Medicaid-hired managed-care organizations hire the pharmacy benefit managers, which act as
middlemen in the drug supply chain.
After a Dispatch investigation into PBM drug-pricing practices for Ohio's Medicaid recipients, in 2018 a consultant hired by the state discovered the PBMS were making close to a quarter of a billion dollars – three to six times the standard industry rate.
The state dumped a “spread pricing” method – in which PBMS were charging the state much more than they were reimbursing Ohio pharmacies to dispense the prescriptions – and tried a “passthrough” model that barred spread pricing. However, a Dispatch investigation found that the PBMS were directing many prescriptions for the most expensive specialty drugs toward pharmacies owned by the same firms as the PBMS.
Gov. Mike Dewine ordered a complete revamp, and Wednesday's action was the final contract to put that goal into effect.
Medicaid Director Maureen Corcoran said the new setup will bring both unprecedented transparency and accountability. Instead of going into the pockets of multibillion-dollar PBMS, the money will go toward “maximizing patient care and services,” she said.
Although average Ohioans may not understand the ins and outs of drug
pricing, “it's a big darn deal” that will act as “a powerful tool in our procurement,” she said.
The state had estimated the contract to act as the state's pharmacy pricing and auditing consultant would cost $2 million a year, so the actual deal is costing $500,000 less annually.
The other bidder was Public Consulting Group, based in Boston. A third prospective competitor turned in its proposal too late to be considered.
Medicaid said the new arrangement would enable the state to achieve three key outcomes:
• Ensure individuals have access to a variety of pharmacies throughout the state, including in small and rural communities.
• Establish fair and equitable dispensing and drug acquisition reimbursements for pharmacies statewide.
• Optimize manufacturer rebates to bring greater value to Ohio taxpayer dollars.
The new oversight firm is designed to eliminate potential conflicts of interest with the single PBM, prevent prescription drug steerage, “and guard against other potential financial mechanisms that could reduce public confidence, increase cost, and obscure visibility into the operations of the program,” the Medicaid agency said.
Myers and Stauffer, which employs 900 people in 19 offices in the U.S., will determine reimbursement methodologies, conduct dispensing and drug acquisition assessments, and maintain accurate and up-to-date pharmacy rates.
The company has more than 40 years of pharmacy management experience and conducted more than 100 pharmacy cost-of-dispensing survey projects in more than 30 states, the Medicaid department said.
Corcoran said it would conduct a similar survey of Ohio pharmacies as new reimbursements are established over the next several months. drowland@dispatch.com @darreldrowland