MIDDLEMEN

“We have to get ahold of this. It’s hurting people,” Coley said. “Every dollar we spend in a wasteful manner is a dollar we don’t have to help people.”

State Medicaid officials declined to comment on The Dispatch’s findings, saying they are preparing their own analysis.

“The state’s priority is to ensure that Medicaid enrollees have access to pharmaceutical benefits and taxpayers get a fair price. To ensure this, the state is conducting an analysis that includes every pharmacy transaction, not samples, with actual prices and actual spreads. Ohio consumers have every right to fair pricing of their pharmaceuticals. We are diligently working to make sure that happens,” Medicaid spokesman Tom Betti said in a written statement.

The report commissioned by Medicaid is expected to be released this month.

Miranda C. Motter, president and CEO of the Ohio Association of Health Plans, would not comment on The Dispatch’s findings, but said the analysis is incomplete because it isn’t statewide and includes only a fraction of Medicaid spending.

“Spread,” she said, “doesn’t equal profit.” The spread also covers administrative costs such as claims processing, pharmacy help desk, drug-utilization review, clinical programs and audit management, she said.

Others have a different view.

“PBMs have been fighting transparency, accountability and fiduciary obligations for years, and now I think we know why,” said Antonio Ciaccia, a lobbyist for the Ohio Pharmacists Association. “PBMs criticize drug companies for inflating their prices. Here it seems they are the ones inflating prices.”

Sen. David Burke, R-Marysville, and a pharmacist, said “whether the drug cost to Medicaid grows slowly or quickly is irrelevant if you don’t review the pharmacy drug-claim payment, When a middleman is paid one amount for a drug, but then reimburses a pharmacy a smaller amount, the difference is called spread pricing. That's what is happening in Ohio, with Medicaid's taxpayer-funded prescription drug program, where the middleman is a little-known entity called a pharmacy benefit manager, which is hired by a managed-care organization.

Here’s how it works: If Medicaid gives

Examples of what PBMs get from 1 drug from 1 pharmacy Drug: Who sold:

Medicaid paid PBM: PBM paid pharmacy: PBM price spread: $8.64 a pill 67 cents a pill $7.97 a pill

which might have actually decreased. It is the primal role of managed-care plans to maximize value in all care networks. ... I remain deeply concerned the incentives to all parties are not aligned with the vision of the taxpaying citizen.”

CVS Caremark is the pharmacy benefit manager, also known as a PBM, for four of the state’s five managed-care contracts; Optum Rx is the other. The Dispatch analyzed data from CVS Caremark because the company, under the same umbrella as the a PBM $10 for Drug ABC, and the PBM gives a pharmacy only $8 for Drug ABC, that’s a $2 price spread, or 25 percent. 66 cents a pill national CVS pharmacy chain, represents the overwhelming majority of Medicaid patients in Ohio.

Mike DeAngelis, senior director of corporate communication for CVS Health, said the company would not comment on either The Dispatch analysis or the company’s pricing information until a state analysis is finished. Both the Ohio Department of Medicaid and state Auditor Dave Yost are studying the pricing setup; the auditor recently asked for additional information.

The CVS spokesman $4.85 a pill prescription drugs and what those PBMs paid pharmacies to get those same prescription drugs.

That price spread indicates the PBMs were keeping roughly 12 percent of the money that the state gave them to obtain drugs. If that percentage can be extrapolated to include all Medicaid-funded drug purchases, it would show the PBMs are receiving tens of millions of dollars from taxpayers every year. 62 cents a pill said the Medicaid managed-care companies that hired them in Ohio actually requested that their compensation come via spread pricing, as many clients do, “because it provides them with stability and certainty around their drug costs.”

“Spread pricing is regularly misrepresented, but it is simply the difference in pricing from what we are paid to what we reimburse — no different than what any business pays its suppliers vs. what it is paid by its end users. ... Under this model, we make money on some drugs, but lose 30 cents a pill money on others.”

DeAngelis also said, “Reimbursement terms and other financial components of any PBM relationship with a client, including CVS Caremark’s relationships with the Ohio managed Medicaid plans, are frequently monitored, audited and subjected to both market checks and competitive bidding. These processes are managed by independent third-party industry consultants retained by the clients. This helps ensure that we remain competitive in the marketplace while also creating continuous downward pressure on our client pricing.”

The Dispatch analysis included every Medicaid/Caremark transaction (125,000plus) at 40 pharmacies in 2017 on a quarterly basis, because that’s how often the state reports Medicaid pricing data. And of those 160 quarters examined (40 pharmacies times 4 quarters), 159 showed a price spread. The only exception was one pharmacy that came out $380 ahead in the second quarter. At the other end of the spectrum was an individual pharmacy that wound up short $78,000 in the last quarter of 2017.

Little state scrutiny

The pharmacy data analyzed by The Dispatch confirm suspicions among