Audit shows company failed to keep drug costs low for taxpayer-funded Medicaid

Oct. 21, 2018

The health insurance group that billed Ohio twice the amount of its competitors to deliver medicine to Medicaid patients also fell significantly short of its goal to keep drug costs low.

The revelation is yet another from an audit by HealthPlan Data Solutions that was commissioned by the Ohio Department of Medicaid to determine whether the state is getting fair prices on drugs.

Portions of the audit were at first kept from the public, but a judge recently ordered that they be made public in response to a Dispatch public records request.

Auditors for HealthPlan found that the pharmacy benefit manager Envolve charged too much overall for drugs as compared to what it agreed to in its contract with Buckeye Health Plan. It is unclear how much more Envolve charged for prescription drugs because the number is redacted, or blacked out.

Three sources, including one who helped write the contract, told The Dispatch the overcharge was in the millions.

The finding is significant because Medicaid agrees to pay managed-care plans based on contracts from the previous year. So an underperforming pharmacy benefit manager raises costs. Pharmacy benefit managers are middlemen in the supply chain, and their intended purpose is to keep costs down.

Buckeye Health Plan and its pharmacy benefit manager Envolve, along with a second pharmacy benefit manager, CVS Caremark, handle one of the five managed-care contracts the state uses to care for 3 million Ohioans on Medicaid.

The Ohio Medicaid-commissioned audit also found that Envolve paid too much in dispensing fees to pharmacists. The amount of those fees also is unknown because the number is redacted.

A spokeswoman for Buckeye said the company is uncertain how auditors calculated the PBM performance and declined to comment further.

Through a spokesman, HealthPlan auditors declined to comment.

None of the four other plans and their PBMs underperformed in their contractual goals to deliver discounted drug prices, according to the audit. In those contracts, the benchmarks were guaranteed in the contract and the PBMs would have had to pay penalties if they weren't met.

Auditors noted that if the rates had been guaranteed in the contract between Buckeye and Envolve, Envolve would owe the difference. A Medicaid spokesman said the state would not recoup any of that money because the contract is a flat rate paid to Buckeye.

Auditors noted that Buckeye didn't hold Envolve to guarantees; Envolve instead had performance goals.

The audit did not explain why Envolve's contract didn't have guarantees, and no one from parent company Centene could explain why.

Buckeye and Envolve both are owned by Centene, a Fortune 100 company headquartered in St. Louis. It reported revenue of $48.3 billion in 2017, according to its business filings.

The exact numbers from the audit are unknown because CVS Caremark and another pharmacy benefit manager, Optum Rx, have sued the state to block release of the report to The Dispatch. The newspaper's Side Effects series, available online at, is a year-long investigation into rising drug costs across the country and the roles pharmacy benefit managers play in the drug supply chain.

Franklin County Common Pleas Judge Jenifer French allowed CVS Caremark and Optum Rx officials to submit portions of the report they felt should be redacted. A hearing has been set in December to decide which, if any, of those redactions should remain.

Medicaid officials have said the department wants the entire report released to the public.

The Dispatch previously reported that unlike the four other Medicaid providers, Centene used its own PBM, Envolve, and a second PBM, CVS Caremark, in its Medicaid contract. That relationship resulted in the state being charged about $11.60 per prescription in 2017, more than double the average cost per prescription charged by the other plans, the audit found.

The average for the other four plans and their PBMs was about $5.60.

Envolve was paid $20 million in taxpayer dollars to perform the same duties that CVS Caremark performed as a PBM. Auditors have said that $20 million charge needs to be explained to Medicaid.

Buckeye CEO Bill Hill said in a letter to The Dispatch that Buckeye is not overcharging Medicaid.

“Taxpayers are not paying a penny more for Buckeye Health Plan’s pharmacy benefits and are receiving better value,” he wrote.

A Medicaid spokesman said the audit has highlighted “inefficiencies” in the contract with Buckeye.

The audit’s most significant finding released in June was that Ohio taxpayers were overcharged up to $186 million for Medicaid prescription drugs last year largely because of PBM practices.

These middlemen in the drug supply chain negotiate a price with drug manufacturers, then turn around and reimburse the pharmacists who dispense the drugs at a different price. The difference between the prices is called the spread taken by the PBMs.

Antonio Ciaccia, lobbyist for the Ohio Pharmacists Association, said questions raised about Centene within the audit focus on “self dealing” between its PBM and its managed-care organization.

Ohio Medicaid spokesman Thomas Betti has said the department will take Centene’s practices into consideration when it reissues managed-care contracts at the start of 2019.