Ohio Medicaid losing money to middlemen, expert testifies
A national drug-pricing consultant says despite implementing a new pricing system and other efforts to rein in pharmacy middlemen, Ohio’s Medicaid program continues “hemorrhaging” tax dollars.
“You are hemorrhaging money right now,” Linda Cahn, a critic of pharmacy benefit managers, told the Joint Medicaid Oversight Commission on Thursday.
Pharmacy benefit managers hired to oversee the $3 billion a year drug program have contracts that allow them to increase profits rather than keeping costs down, she said. The profits are largely hidden and come from rebates from drug manufacturers, manipulating drug costs, self-dealing with affiliated pharmacies and other loopholes, she said.
“There are so many problems here, you have to write a contract that addresses all of them, and you have to bring in people who know enough about this to help the Medicaid division do that ...it’s a very complex industry,” Cahn said.
“If you address all of the problems, you will dramatically, dramatically reduce your cost and end up with far better coverage.”
Cahn said to solve the problem, the state needs to negotiate an “air-tight contract” or handle pharmacy benefits in house. “All you can do is put controls on every one of these loopholes.”
She said Medicaid officials are not to blame.
“There is not a state in the country that has a good contract. I’ve never seen a good contract with an insurance company.”
Committee chairman Rep. Mark Romanchuk, R-Mansfield, said he asked Cahn to help lay out a road map for much-needed reforms, starting with improved contracts.
“Everybody knows what needs to be done. The question now is will that policy be executed properly,” he said.
At the legislature’s urging, Medicaid officials are in the process of contracting directly with a single pharmacy benefit manager (PBM) to administer drug benefits.
The $28 billion Medicaid program provides health insurance to nearly 3 million poor and disabled Ohioans. Currently, the state contracts with five private managed care plans to oversee the program and they employ three PBMs, CareSource, ExpressScripts and OptumRx, to manage pharmacy benefits.
A recent study found that CareSource and OptumRx billed the state $244 million more than they paid pharmacists in a single year, allowing them to profit three to six times the industry standard. Using a spread-pricing model, the PBMs billed the state far more than they paid pharmacists to fill prescriptions and kept the difference.
Ohio this year switched to a pass-through pricing model, which requires PBMs to pay pharmacists the exact amount they bill the state and pays them a fee for their services. But Cahn said even with the new system there are still hidden loopholes allowing PBMs to profit. For instance, PBMs can set artificially high drug prices and profit through an affiliated pharmacy.
The national trade association representing PBMs criticized Cahn’s credibility before she testified.
“Ms. Cahn is widely known as a vocal PBM critic, who initially gained prominence from a series of lawsuits she led against PBMs beginning in 1997. Based on any cursory review of Ms. Cahn’s past public comments, it is not possible to believe her testimony can reflect an impartial, objective perspective of PBMs’ role in Ohio’s Medicaid program,” Matt Borges, a Columbus lobbyist and former state GOP chairman representing the Pharmaceutical Care Management Association, wrote in a letter Tuesday to committee members.
To “gain a more complete picture,” Borges suggested the panel hear from others, including the association. “PBMs are the only entities in the drug supply chain focused on reducing cost,” he said.
Medicaid officials did not immediately respond to a request for comment. It was not immediately apparent whether any were at the meeting of the legislative panel established to oversee Medicaid.