Censored analysis confirms complaints about pharmacy benefit managers

The Ohio Department of Medicaid on Tuesday released a heavily redacted report analyzing the costly practices of pharmacy middlemen in the $24 billion tax-funded Medicaid program.

The move comes as a Franklin County judge continues to mull over whether to order disclosure of the full, or unredacted, analysis of drug pricing, pharmaceutical rebates and other cost data.

Common Pleas Judge Jenifer French’s decision is at least three months away after she agreed to move a hearing on the matter scheduled for this week to Dec. 18.

In the meantime, French said parts of the 51-page report that are not in dispute could be released to the public.

French last month granted a temporary restraining order to block release of the full report at the request of CVS Caremark ard OptumRx — pharmacy benefit managers for Medicaid's five managed care plans — who said it contained "trade secrets" that would hurt their businesses if disclosed. They have asked French to grant an injunction permanently blocking release of the full report.

"While some questioned the need for redactions, the disclosure of our proprietary rates, formulas and negotiation strategy to lower the drug prices charged by pharmaceutical manufacturers would have significantly impacted our ability to negotiate the lowest rates and fees for our clients in a highly competitive market, which would ultimately cost the state and the taxpayers more," said CVS spokesman Mike DeAngelis.

Data disclosed Tuesday showed "CVS underpaid the pharmacy providers a net $335.8 million on generic drugs" while "OptumRx underpaid the pharmacy providers a net $21.3 million on generic drugs." That data confirms complaints from pharmacists about low reimbursement rates.

Medicaid officials argue that the public is entitled to see the analysis — which cost taxpayers $50,000 — in its entirety.

“We continue to believe that the public is entitled to all PBM pricing information, and we look forward to making that case to the judge later this year,” said Medicaid spokesman Tom Betti.

The redacted version of the report released Tuesday substantiates a previously released executive summary that found pharmacy benefit managers — or PBMs — charged taxpayers three to six times more than industry-standard fees.

PBMs billed taxpayers $223.7 million more for prescription drugs in a year than they reimbursed pharmacies to fill those prescriptions. That 8.8 percent difference, or price spread, included $197 million kept by CVS Caremark, the PBM for four of the five Medicaid managed care plans. The rest went to OptumRx, the PBM for the other plan.

The study said that pharmacy benefit manager processing fees should be in the range of 90 cents to $1.90 per prescription. CVS Caremark billed the state about $5.60 per script; Optum charged $6.50.

Newly released data showed one plan, Buckeye Community Health, had a price spread of 16.5 percent, double the other four plans.

Medicaid officials have since cancelled "spread pricing" contracts with CVS Caremark and OptumRx and ordered managed care plans to negotiate new ones begining Jan 1, in which a benefit managers will be paid a set fee per transaction and required to bill the state the same rate paid to pharmacists.

PBMs negotiate drug prices with manufacturers, set rates paid to pharmacists and process claims.