Attorney General Dave Yost seeks reforms to rein in PBM abuses

April 22, 2019

Ohio Attorney General Dave Yost picked up the spray bottle and squirted the dirty "window" in his office. Then he grabbed a towel and scrubbed away at the grime for several seconds to reveal several human faces.

The news conference visual aid likely won't make the highlight reel for any Ted Talks.

But this was Dave Talk for saying that Ohio needs more transparency and better oversight of the drug middlemen that each year spend billions of taxpayer dollars on prescriptions for the poorest Ohioans.

"I still, after all the work we did, cannot tell you what the profit is. So how can we possibly know whether we got a good deal?" Yost said during the half-hour gathering about the middlemen, known as pharmacy benefit managers (PBMs).

"Customers feel the effect of PBMs because PBMs essentially are controlling prices and essentially control what drugs are covered."

The PBMs negotiate rebates from drug manufacturers and decide how much to pay pharmacies on behalf of managed-care plans that work with the state. As a third party that contracts with a private company, the PBMs’ contracts are hidden not only from the public but often kept secret from the state officials responsible for programs such as Medicaid, the federal-state health-care program for the poor and disabled.

Investigations showed that the PBMs serving Ohio Medicaid — CVS Caremark and OptumRx — in 2017 charged $224 million more for drugs than they reimbursed pharmacies. The total was generated by a rate three to six times the industry norm, a state consultant said.

“PBMs have taken advantage of the lack of transparency and lack of centralization to the detriment of Ohio taxpayers,” Yost said. “This must stop. Centralization will allow for the comprehensive review of prices across the entire drug-purchase portfolio to eliminate this problem.”

Ohio’s largest Medicaid managed-care company, CareSource, this month announced it was ditching CVS as its PBM on Jan. 1 and entering into a contract with Express Scripts that state officials and a third-party auditor will be able to see and monitor — although it will remain outside of public view.

But the attorney general said, "I'm very skeptical just in general about changing the name of a thing and putting a new paint job on it and calling the old thing something new when actually it's the same old Chevy under the paint job."

So Yost’s proposal goes a step further. Not only would state officials be able to see PBM contracts, but they also would write a master contract that all PBMs working with state programs would have to use.

“Ohio needs to aggregate its purchasing power to become a better negotiator and a smarter consumer,” he said.

Yost acknowledged that combining all state PBM relationships into one overarching deal might be more "aspirational" than realistic.

Gov. Mike DeWine responded to Yost's plan by saying, "Transparency is important in regard to PBMs, just not for the state and Medicaid and taxpayers, but it's important for every citizen of the state of Ohio.

"So, I'm going to take a look at it, and we're going to see if there are some good ideas in there — I'm sure there are — and we'll move forward. ... It's important."

The Pharmaceutical Care Management Association, represented by former Ohio Republican Chairman Matt Borges, said, “We applaud the Ohio attorney general for examining prescription-drug prices. We are currently reviewing the AG’s outlined concepts. …

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"PBMs support transparency that lowers prescription-drug costs for consumers, and offer providers and health plans the information necessary to improve patients’ health outcomes.”

Yost proposes:

• Giving the state auditor unrestricted authority to review all PBM drug contracts, purchases and payments.

• Mandating that PBMs bear a legal responsibility to protect the financial interests of the state.

• Prohibiting nondisclosure agreements on drug pricing.

"We need to move away from this opaque, complicated system to something that is more transparent," Yost told reporters.

"The fact of the matter is that nondisclosure agreements have been abused in this sector and in many other sectors and are stifling the proper efficient operation of markets. ... Nondisclosure agreements don't serve the public interest in general. And a lack of transparency has allowed this situation to, I think, grow out of hand."

In addition to the Medicaid department, Yost’s office is investigating PBM contracts on behalf of the Department of Administrative Services and five pension funds.

“When state agencies entered into these nebulous deals with PBMs, they unknowingly hired a fox to guard the henhouse,” Yost said. “But he was a smart fox. He didn’t kill the chickens; he helped himself to the eggs.”