Amid pharmacy benefit manager inquiry, officials' ties to CVS questioned

Possible conflicts of interest between the Kasich administration and CVS are fueling skepticism over whether Ohioans will see changes in a Medicaid setup that gives the national pharmacy company up to six times its actual cost of providing prescription drugs to Ohio's poor and disabled.

The relationships are shrouded in secrecy — in part because of confidentiality laws and in part because the administration of Gov. John Kasich has been less than forthcoming about critical aspects of CVS’s business with the state.

The concerns are heightened because Medicaid officials withheld key information from state legislators about CVS costs and displayed a reluctance to make substantive changes to a system that many lawmakers and pharmacists say is a ripoff of taxpayers.

"We have a right to know this information and we need to make decisions with that information," said Sen. Dave Burke, R-Marysville, a pharmacist who also is chairman of the Joint Medicaid Oversight Committee.

Among the connections between CVS and members of the Kasich administration and, more generally, Ohio’s GOP-dominated political leadership:

• CVS lobbyist Bridget McAuliffe is married to Matt McAuliffe, Kasich’s director of cabinet affairs and executive director of the Ohio Republican Party between 2013 and 2015.

• Another CVS lobbyist, Jason Mauk, was hired April 26. He had resigned as the Ohio Senate’s chief of staff late last year to work for the Ohio Republican Senate Campaign Committee. That puts him in a position to lobby GOP lawmakers on CVS’s behalf even as he deals with campaign strategy and money to get them re-elected.

• Margaret Scott, former pharmacologist with the Ohio Department of Medicaid, was for years involved in rate-setting and taking complaints about reimbursements to pharmacies from an arm of CVS, pharmacy benefit manager CVS Caremark. She simultaneously had a side job as a pharmacist in CVS retail stores. Then, last year, while continuing in her state job, she negotiated a position and then left to work as a clinical adviser for CVS Caremark.

Special treatment

Meanwhile, CVS Caremark — the pharmacy benefit manager that controls the vast majority of drug business under the state’s Medicaid program and handles other state-administered funds — appears to have received special treatment from the administration:

• The state Department of Medicaid gave CVS Caremark an advance look last month at a report it commissioned about a drug-pricing plan under which the department is paying CVS millions of dollars through its contractors. Pharmacists who made allegations of price gouging, as well as lawmakers looking into those complaints, were left in the dark for nearly three weeks until Kasich officials made public a summary of the report — but not the entire document. The department said it couldn't release the full report because some of the data were proprietary. The Dispatch requested a copy with the proprietary information redacted, but Medicaid officials on Friday refused, saying the entire report is proprietary.

• Administration officials ignored a prime finding from the consulting firm that wrote the report. It said that CVS Caremark should be paid 95 cents to $1.90 per prescription for dispensing fees, judging by the industry's standard rate. But during their presentation to a legislative oversight panel, Medicaid executives didn't mention that CVS is being paid an average of three to six times that amount — $5.60 — on each of 35 million prescriptions. Medicaid officials also were silent during the hearing on the fact that the consultant's finding means CVS received at least $130 million to $164 million above its costs in just one year from Ohio taxpayers.

• And it was revealed last week that the Ohio Department of Health channels federal HIV drug-assistance dollars into a program that requires patients to get the medicines exclusively from CVS. That’s public money, but the department will not answer questions about how much money is involved or why it's making patients use CVS. It said that it can't comment because the program is now part of a lawsuit.

The Kasich administration said in an email that Medicaid officials have worked "to rein in Medicaid’s costs, including better controlling drug costs with managed care, have helped stabilize the program and make it possible to serve more people in need."

As for CVS lobbyists who also have roles in Ohio government or with government officials:

“Jason Mauk has never been an employee within the Kasich administration and Matt McAuliffe doesn’t work on Medicaid policy issues," Kasich’s spokesman, Jim Lynch, said in an email.

Placing the blame

A Dispatch investigation has found that CVS Caremark and other pharmacy-benefit managers have required cancer patients to wait weeks for lifesaving drugs when they were immediately available at their oncology clinics. It's also found that CVS has used its business as the primary pharmacy benefit manager for Ohio Medicaid — a federal-state effort that funds health care for the poor and disabled — to cut reimbursements to competing pharmacies and then bill taxpayers almost $200 million more for the drugs last year than it paid the pharmacies.

Questions began to arise after a January report in which the legislative Joint Medicaid Oversight Committee reported that the program's drug spending had increased 21 percent over a two-year period though the cost of generic drugs has been dropping rapidly. At the same time, pharmacists reported a precipitous drop in reimbursements for the prescriptions they fill.

The details are difficult to extract because of the way the Ohio Medicaid system is structured: CVS Caremark's pricing data are secret under its agreements with the health plans that administer Medicaid. Even so, on Friday the department blamed the genesis of that secrecy not on CVS Caremark and other pharmacy benefit managers, but on drug-makers.

"As you know, pharmaceutical manufacturers go to extreme lengths to keep drug prices secret from the public," Medicaid spokeswoman Melissa Ayers said in an email. "This secrecy is passed down through the value chain, creating mistrust among payers, insurers, pharmacy benefit managers, pharmacists and patients. This issue is not unique to Medicaid or Ohio. It is an issue for all insurers nationally."

Amid the concerns about secrecy in Ohio, Medicaid officials commissioned an audit by Health Plan Data Solutions, which brought nationally unprecedented transparency to the process. But during a recent hearing before the Joint Medicaid Oversight Committee, Medicaid officials tried to downplay some key findings of the audit — and never even mentioned the lower prices that represent the industry standard.

Medicaid officials told legislators there was no crisis or need for immediate intervention. They repeated that the price spread — the money taken by CVS Caremark — was 8.8 percent, instead of saying it was more than $197 million.

Lawmakers were outraged.

"You obviously have a lot more information than what you're sharing with us," said Sen. Bill Coley, R-West Chester.

It wasn't the first time that Kasich administration officials have been stingy with information related to CVS.

After The Dispatch revealed in March that Margaret Scott had negotiated a job with CVS while still handling CVS-related business for the Department of Medicaid, the department said it had asked the Ohio Ethics Commission to review its practices. Medicaid officials have subsequently declined to discuss Scott.

The Ethics Commission investigation is ongoing, and a CVS spokeswoman on Friday said, "there was absolutely no quid pro quo involved" in Scott's hire.

"At CVS Health, we adhere to the highest level of ethics and standards," the spokeswoman, Christina Beckerman, said in an email. "The state of Ohio lays out very clear rules for who companies can hire and work with and we follow those rules to the letter. We participate in the legislative process to promote policies that reflect our commitment to ensuring access to affordable medication, which would include saving the state of Ohio Medicaid program $145 million annually."

Healthy skepticism

Some pharmacists and lawmakers are skeptical about whether CVS Caremark is producing the Medicaid savings it claims.

Meanwhile, the Ohio Department of Health continues to require patients in its HIV Drug Assistance program to use only CVS Pharmacy to get their medicines. The practice continues even after a mailing last year by CVS Caremark potentially exposed the health status of 6,000 HIV-positive Ohioans to the public.

The health department hasn't answered questions about how CVS came to possess what patients say was confidential health information — or even such basic questions as how much public money is flowing into the program.

CVS Health has contributed $28,759 to more than 30 state lawmakers since 2016, mostly to Republicans who control both the House and Senate. The largest amount, two campaign contributions totaling $2,500, went to former House Speaker Cliff Rosenberger. Most legislators, including some members of the Joint Medicaid Oversight Committee, received $500.

During the recent JMOC hearing in which Medicaid officials frustrated lawmakers with their lack of disclosure about how CVS is benefiting from state business, CVS Caremark lobbyist Bridget McAuliffe was sitting in the crowd. It's unclear what influence she might have with the Kasich administration, but her husband, Matt McAuliffe, is a senior member of it.

He did not respond to a request for comment.

Mauk, the CVS lobbyist who is simultaneously helping to run Republican Senate campaigns, said that since April, he has been paid by CVS to monitor media coverage and "advised them on policy developments."

"Our candidates are smart people," Mauk said. "They’re very capable of knowing the difference between lobbying and campaign consulting. They also know this is nothing new, and the legislative campaign committees have had for many years campaign consultants who also work in the lobbying space. Everyone knows how to separate the roles, including Senator Burke."