Side Effects

Attorney General Dave Yost seeking $16 million repayment from pharmacy middleman OptumRx

Feb. 19, 2019

After nearly a year of investigating, Ohio is taking its first steps to recover money from pharmacy middlemen who do billions of dollars worth of business with state agencies.

Attorney General Dave Yost announced Tuesday that he is seeking repayment of nearly $16 million paid to pharmacy-benefit manager OptumRx by the Bureau of Workers' Compensation. Yost intends to take OptumRx to nonbinding mediation, saying the company has overcharged the bureau since 2015. Such mediation is required under the contract between the bureau and OptumRx. If it fails, the dispute presumably will be taken to court.

"The state of Ohio and the BWC consider these matters of public significance and have calculated the following overcharges attributable to OptumRx's failure to adhere to agreed discounts on generic drugs. ..." says a copy of Yost's Feb. 11 letter to OptumRx that was obtained by The Dispatch.

As part of its Side Effects investigation into pharmacy benefit managers, The Dispatch reported in May that the Bureau of Workers' Compensation had performed an analysis of its prescription-drug spending and, in the words of former BWC pharmacy program manager John Hanna, "discovered we were being hosed."

The firm that conducted the analysis, Healthplan Data Solutions, determined that OptumRx overcharged BWC by $5.7 million in 2017. That's 6.5 percent of the $86 million in total agency spending on prescription drugs that year. The bureau fired OptumRx as a consequence of the analysis.

In his letter to OptumRx, Yost wrote that the pharmacy benefit manager overcharged the bureau by $6 million in 2015, by $2.7 million between the beginning of 2016 and the end of October 2016 and by $7.2 million between Nov. 1, 2016, and Oct. 27, 2018.

More such moves are expected against pharmacy benefit managers administering public dollars. OptumRx also is the pharmacy benefit manager for one of Ohio's five Medicaid managed-care plans, while CVS Caremark is PBM to the other four. Together, the companies administer $2.5 billion in annual Medicaid drug spending.

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The Dispatch conducted an analysis in June using confidential reimbursement data that showed the PBMs were charging taxpayers far more more for prescription drugs than they were reimbursing pharmacists. The Ohio Department of Medicaid then hired Healthplan Data Solutions to conduct an analysis using all reimbursement data.

That study found that the two PBMs charged $224 million more a year for drugs than they were reimbursing pharmacists. That was as much as $187 million above the typical cost of administering such programs in one year, the analysis found.

PBMs act as middlemen between drugmakers, insurers and pharmacies. OptumRx, CVS Caremark and ExpressScripts control 80 percent of the pharmacy benefit management business in the United States, according to filings in federal litigation over CVS's merger with insurance giant Aetna.

Critics say PBMs use their size and a lack of transparency to drive up drug costs — and corporate profits. But the PBMs say they use their size and sophistication to achieve savings for consumers and taxpayers.

In the case of the workers' compensation bureau, Yost said OptumRx failed to manage the effective rate of the bureau's maximum-allowable-cost list "to achieve the discounts against (the average wholesale price) promised by OptumRx, and OptumRx wrongfully increased prices charged to BWC."

Last year, while he was state auditor, Yost released a critical analysis of the practices of the PBMs that serve the Medicaid program. It confirmed that they were charging far more than they were paying for drugs, and "various practices were identified as indications of potential conflicts of interest that could impact pharmacy services in the Medicaid program and other publicly funded health care.”

The same report said analysts didn't have enough data from the Medicaid operations involving OptumRx and CVS Caremark to "provide a complete picture of pharmacy costs and PBM compensation."

It added that “there are a number of additional factors that impact PBM revenues and pharmacy reimbursements that were outside of the scope of this report, such as rebates, additional plan fees, and pharmacy fees. The Ohio legislature should take steps to mandate the reporting of additional statistical and financial data that would provide a more complete understanding.”