Judge rules that part of CVS/Medicaid report can be released

August 7, 2018

A Franklin County judge has blocked release of a full state report detailing the costly practices of pharmacy middlemen in the tax-funded Medicaid program - at least for now - but will allow some parts to be disclosed.

Common Pleas Judge Jenifer French Tuesday granted a temporary restraining order at the request of CVS Caremark, which argued the 51-page analysis contains trade secrets including drug pricing, rebate and cost information.

However, French ordered that parts of the report not in dispute can be released a soon as potentially proprietary information is redacted, possibly as early as Friday.

The judge set a hearing for Sep. 7 to consider whether to permanently block release of the full report.

"Once this is released it cannot be taken back so we're kind of in a unique situation where if I'm not to grant the temporary restraining order, there is no remedy left," French said.

"I'm going to grant the temporary restraining order as to only the specific items to which the plaintiffs believe are excluded from the public record's request based upon the fact they are trade secrets."

The Ohio Department of Medicaid commissioned the $50,000 analysis and planned to release the full report last month at the request of The Dispatch, several lawmakers and others. The Dispatch has been investigating CVS and other pharmacy benefit managers as part of its Side Effects project.

The Medicaid Department did not contest French's decision.

“Transparency is not only the duty of government to its owners—the people of Ohio—but it’s also essential for the market to function properly. We believe this deeply and will continue to pursue it,” Medicaid spokesman Tom Betti said after the ruling.

Mike DeAngelis, a spokesman for CVS, said the company was pleased with the judge's decision and reiterated their need to protect proprietary data.

"Making public information such as the proprietary rates, formulas and our negotiation strategy to achieve lower drug prices and cost-effective dispensing within our pharmacy network would significantly impact our ability to negotiate the lowest rates and fees in a highly competitive market, which would ultimately cost the state and the taxpayers more," he said.

Attorneys for the state have said they do not consider anything in the report to be a trade secret. They've also accused pharmacy benefit managers of “driving up costs” in the tax-funded health insurance program for the poor and disabled and of hiding their pricing and other activities.

According to an executive summary of the report, which CVS agreed could be released, 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 the year ending March 31 than they reimbursed pharmacies to fill those prescriptions. That 8.8 percent difference, or price spread, included $197 million kept by CVS Caremark, PBM for four of the five Medicaid managed care plans. The rest went to OptumRx, PBM for the other plan. OptumRx was not a party to the initial lawsuit but joined with CVS Tuesday to oppose release of the report unless proprietary information is redacted.

The study said that PBM 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 — three to six times higher.

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

Attorneys for CVS Caremark have said they provided proprietary information for the report in exchange for promises it would remain confidential. Release of that data “would be devastating to Caremark’s entire nationwide business model, as the strategies and processes used by Caremark in Ohio are closely related to the strategies and processes used by Caremark nationwide,” they argued.

The pricing structures, fees and other details of its Medicaid business has never been publicly revealed, they said.

Although Medicaid officials originally rejected requests to release the report, state attorneys now say it is a public record and must be disclosed.

Rejecting claims of confidentiality, they also argued that CVS “signed off” on a contract between Medicaid and HealthPlan Data Solutions, the Columbus firm that prepared the report, giving it the discretion to allow Medicaid officials to disclose the report “to anyone, for any reason. Ultimately, that’s exactly what happened — HDS agreed to allow ODM to disclose confidential information in the report to anyone.”