Side Effects

Medicaid drug-service switch raises questions about past practices

May 20, 2019

Another of Ohio's five Medicaid managed-care plans says it is jettisoning CVS Caremark as its manager of hundreds of millions of dollars worth of pharmacy benefits.

The company, Buckeye Health Plan, is hailing the June 1 change as a move toward increased transparency. But it raises new questions about whether CVS and Buckeye owner Centene Corp. — two of the 60 largest companies in the country by revenue — have overbilled Ohio's health program for the poor.

The Ohio Department of Medicaid said that's a matter for Attorney General Dave Yost to decide.

Buckeye said last week that CVS is providing just three of the 14 pharmacy-benefit services necessary to serve its customers. Another PBM owned by Centene provides the remaining 11, Buckeye said in an email.

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CVS didn't respond to questions for this story, but if Buckeye's description is accurate, it would mean that CVS has charged Buckeye more for providing just a fraction of the PBM services it has provided to the three other Ohio Medicaid plans it was contracted with, according to figures in a report produced last year for the Medicaid Department. It also would mean that Buckeye paid a corporate sibling still more to provide the rest.

An Ohio legislator who has led efforts to investigate and reform the way the state does business with pharmacy benefit managers said Friday that the news about Buckeye raises serious questions.

"In my opinion, that really needs to be looked at," said Rep. Scott Lipps, R-Franklin, who added that he would ask Yost to investigate.

In its Side Effects series, The Dispatch has been investigating prescription-drug pricing, including the influence of PBMs. They represent insurers as they negotiate rebates with drug manufacturers, develop preferred drug lists and determine reimbursements for pharmacies. The series has shown that the industry is highly concentrated, enabling the big PBMs to operate behind a veil of secrecy that the Medicaid department and counterparts nationwide are now working to draw back.

"It's high time that we step in and stop the opaqueness," said state Sen. Bill Coley, R-Cincinnati, who estimates that PBMs are overcharging Medicaid and other state programs by more than $1 billion a year.

In the case of Buckeye, which handles more than $250 million in Medicaid prescription spending annually, it's difficult to determine even whom it paid to provide which services. A state-sponsored analysis last year found that in 2017, Buckeye was paying both CVS and Envolve Pharmacy Solutions — Buckeye's corporate sibling — to provide pharmacy benefit management.

CVS collected $33 million more from taxpayers through Buckeye than it paid pharmacists for the drugs they dispensed. Envolve collected $20 million more. Those differences are known as "spread pricing," a practice in which pharmacy benefit managers bill the state far more than they pay pharmacists for medications and keep the difference.

It's a practice that government officials across the country are working to eliminate.

With that practice, CVS Caremark, on average, was charging $7.22 more per prescription than it was passing along to pharmacists, and Envolve was charging an additional $4.38. The combined $11.60-per-script spread was 76% higher than the next-highest spread — the $6.58 per prescription that CVS was getting from Paramount Advantage to handle all of its PBM services.

The same analysis, by Healthplan Data Solutions, concluded that all of the managed-care PBMs were underpaying pharmacies and greatly overcharging taxpayers. Their “fees should be in the range of 95 cents to $1.90 per prescription,” it said.

Officials with Buckeye, its PBMs and the Medicaid department were not clear about the division of labor.

The Medicaid department said that among the services provided by Envolve were “utilization management, specialty management, data analytics, drug utilization review and formulary management.”

Asked if CVS was providing those services to each of the four Ohio Medicaid plans it serves, spokesman Michael DeAngelis said: “We provide all of the services you listed to our Medicaid (managed-care organization) clients in Ohio.” When he learned that Envolve, which is owned by the same company as Buckeye, was said to be providing the same services, DeAngelis said the two companies “focus on different elements within those categories.”

Last week, when Buckeye said it was getting rid of CVS in favor of RxAdvance, a spokeswoman told a still-different story.

"We use Envolve Pharmacy Solutions to deliver most of the 14 core functions performed by a PBM, as they can do this efficiently and effectively," Buckeye spokeswoman Kimberly Scher said in an email. "They have traditionally subcontracted three of these services — pharmacy network, claims adjudication and rebate management — to CVS Caremark."

Buckeye is instead hiring RxAdvance, a company in which Buckeye owner Centene has made an undisclosed investment and retains the option to buy more of, Forbes reported last year.

"With the launch of RxAdvance, Envolve can now utilize this company’s technology to provide the three pharmacy services previously managed by CVS Caremark, creating greater pricing transparency and enhancing the integration of pharmacy services into a member’s overall health management to improve health outcomes," Schur said.

Antonio Ciaccia, spokesman for the Ohio Pharmacists Association, said that having the same ownership as its PBMs diminishes Buckeye's incentive to put taxpayer interests ahead of its contractors'.

"If the state hires health plans to control drug costs, how can they be adequately incentivized to continue to do so when those same health plans begin to profit off the drug?" he said. "While not all will abuse that power, I think a tremendous amount of scrutiny is necessary to ensure they don’t."

Lipps, the state representative, said Friday that he wants to know exactly what services RxAdvance and Envolve each plan to provide and whether they plan to bill for them at the same levels that Envolve and CVS have.

"I'm not accusing anybody of double-billing, but at first glance, it doesn't look good," he said.

Ohio Medicaid spokesman Kevin Walter said that his agency is continuing reforms to increase the transparency of the PBMs it does business with and to "ensure taxpayers get the best possible deal."

"Ohio Medicaid remains diligent in wanting to avoid any pharmacy overcharges, whether it occurs through a managed care plan, a PBM associated with a managed care plan, or a PBM not associated with a managed care plan," he said.

Asked if he believes that Ohio taxpayers overpaid CVS for the three PBM-related services that Buckeye says CVS provided, Walter said: "The attorney general is conducting an ongoing investigation into overall potential PBM abuses. (The Ohio Department of Medicaid) has no further comment to offer."