Medicaid prescription transparency lauded, but Yost still has questions
August 26, 2018
The Ohio Department of Medicaid says a new plan will bring the greatest transparency in the country to its managed-care programs.
But Ohio Auditor Dave Yost — also a staunch advocate of government transparency, especially involving Medicaid — is opposed to its immediate implementation.
Why tap the brakes? In short, it's a complicated system, Yost said, and he wants to make sure that the state's move to a new process doesn't increase costs.
After questions from The Dispatch and the legislature, the Medicaid department announced this month that it would seek new contracts for work currently being done by pharmacy benefit managers CVS Caremark and OptumRx to handle $2.5 billion in annual prescription drug business.
At an event touting his expansion of Medicaid to an additional 653,000 Ohioans, Gov. John Kasich said last week that his administration's managed-care system has controlled costs. But he acknowledged that there's still work to be done.
“We know we have an issue with rising pharmaceutical costs," he said. "We’ve known this for a while. That’s why we’re going to this new model on the PBMs. But that’s only part of it, because why are some of these costs going up so high? We have to think about that, because that’s the single biggest growing cost in the Medicaid program.”
The administration's move came after a Dispatch analysis showed that the companies were billing taxpayers for far more than they were paying pharmacies for drugs. A subsequent analysis by the Medicaid department set that figure at $224 million a year — more than triple the rate that the consultant who did the analysis said the companies should have been charging.
Those amounts don't include rebates and other money CVS Caremark and OptumRx are extracting from manufacturers, which by contract are kept secret.
They also don't include fees the pharmacy benefit managers charge pharmacies. Those affect the net pay that pharmacies receive for serving Medicaid patients, but like so much else in the current Medicaid drug-pricing scheme, they're hidden behind a veil of secrecy.
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So, the Medicaid department is designing a model for the start of 2019 that spokesman Tom Betti says will set a new standard for transparency when it comes to Medicaid managed care — a system under which the state contracts with insurers that are tasked with controlling costs. With so much money hidden behind the contracts the managed-care plans have with their pharmacy benefit managers, it has been difficult to evaluate how well the system is working.
Medicaid Director Barbara Sears said the new plan marks the beginning of a more thorough reform.
“We have always viewed the pass-through model as sort of the first step in what will likely be several steps," she said. "But the first step in making the transition is getting the transparency. Once we have transparency, it is likely that will lead us to another step.”
Other states and departments within Ohio state government have adopted a "pass-through" system similar to the one the Medicaid department is proposing.
Under that system, PBMs are paid whatever they pay a pharmacy for filling a prescription, plus a set administrative fee. Under the existing contracts, the state — and the taxpayers — have no idea how much PBMs are marking up their prices when they bill the managed-care plans and, ultimately, the taxpayers.
Betti said that others have adopted pass-through models, but Ohio Medicaid's will be far more transparent. For example, he said, it will ensure that the PBMs are passing along all of the millions of dollars they're receiving from manufacturers to the managed-care plans and through them to the state. Such rebates are notoriously opaque, and some experts say manufacturers simply increase the list prices of the medicines to pay for them.
Such increases hurt consumers, in part because their co-pays are based on the inflated list prices. But the Medicaid department says it plans to insulate taxpayers by requiring that "mandatory reporting and encounter reviews" be done by the managed-care plans.
Pharmacists also have complained that PBMs sock them with an ever-changing array of fees and other charges that ultimately affect their net reimbursements. Betti said the new model will force that all of those to be reported as well.
"We are requiring a 100 percent transparent pass-through payment model," he said. "All PBM revenue streams will be transparent to the (managed-care plans) and Ohio Medicaid."
So the Medicaid department is promising unprecedented transparency, but how will it make sure the PBMs don't figure out ways to make taxpayer money on the side?
"We have a strong oversight system already established within our managed-care contracts — which includes thorough data reviews, fines and other penalties for violations of the agreement," Betti said. "Over the course of the next few months, we will be reviewing the process carefully to ensure the highest level of transparency for the greater good of the public."
For Yost, the goal of transparency is laudable, but on Friday he said there's too much that's not yet known to commit to scrapping the existing system by Jan. 1. He did, however, back away from his admonition that the state should wait until March before making any changes.
"There's nothing magic" about that, he said. "But until we better understand this, we shouldn't make a decision we don't know the impacts of. This is how we did (the current, opaque pricing system) in the first place."
Yost, the Republican nominee for attorney general, also has raised concerns that the new model the Medicaid department is developing will end up costing taxpayers more than the current one. Betti countered that the department's goal is to at least be cost-neutral, but Yost said there's no guarantee of that.
"Just because you say something is going to be cost neutral doesn't make it so," he said.
So, would the Medicaid department be willing to let the auditor's office participate as it designs its new, totally transparent model?
"The Department of Medicaid appreciates our partnership with the auditor of state and his office’s statutory role in Medicaid’s program integrity ensuring taxpayer dollars are allocated appropriately," Betti said.
For his part, Yost said his office can participate, but its role has to be limited.
"We can help in analyzing things, but we can't participate in the design," he said.
