Side Effects

New 'transparent' setup for Medicaid drug purchase will be secret to public

Medicaid managed-care provider CareSource last week announced that it had inked a new contract with pharmacy-benefit giant Express Scripts that CareSource said would bring groundbreaking transparency to Ohio's billion-dollar Medicaid drug marketplace.

But the contract itself is secret.

That has some experts questioning whether there still will be room for the kinds of non-transparent behavior blamed for costing taxpayers billions nationwide.

The price of prescription drugs is the fastest-growing part of the health-care sector, and critics have blamed pharmacy middlemen such as Express Scripts, CVS Caremark and OptumRx for part of that rapid rise. The critics say the pharmacy benefit managers used secrecy to raise prices and boost profits while the PBMs say they're saving consumers money.

Last year, after a data analysis by The Dispatch, the department of Medicaid released its own that showed the PBMs working for managed-care organizations such as CareSource billed the plans — and ultimately taxpayers — $224 million more for drugs than they paid pharmacists. That total reflects three to six times the going rate, the Medicaid department's consultant found.

Issues surrounding PBMs have spread far beyond Ohio, with the U.S. Senate holding hearings into their practices this month and several states taking steps to investigate — and possibly eliminate managed care from their Medicaid pharmacy operations altogether. Some Ohio lawmakers want to return to a fee-for-service, a setup replaced by managed care under the administration of Gov. John Kasich.

Against that backdrop, Dayton-based CareSource announced last week that CVS Caremark would no longer be its PBM to the 1.2 million Medicaid patients it serves in Ohio. The company also announced that it was dropping CVS and tapping Express Scripts be its PBM to another 600,000 clients in Kentucky, Indiana, Georgia and West Virginia, a move that will cost CVS billions of dollars.

The Ohio Department of Medicaid already has implemented a new pass-through pricing model that it hopes will add transparency to the way the state buys $2.5 billion worth of drugs annually. But the department did not answer directly this week when asked whether it reviews its managed-care organizations' contracts with the PBMs that spend that money.

CareSource is touting its new contract with Express Scripts as transparent because Ohio Medicaid officials will be able to see it and because CareSource will work with the department to hire an independent third party to review its performance.

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"(T)here’s nothing hiding, nothing leaking, it’s all there,” CareSource President & CEO Erhardt Preitauer told The Dispatch when the new contract was announced.

The Medicaid department said its lawyers are reviewing the CareSource-Express Scripts contract.

But there's still the fact that CareSource is calling "transparent" a contract that the public can't see, and the only parties that will be able to view it are those on whose watch nearly a quarter-billion dollars worth of spread pricing took place in 2017.

In an interview Monday, CareSource Senior Vice President Clayton Edwards said that if CareSource made public its contract with Express Scripts, its competitors would have an advantage by copying its new transparency model and other innovations.

"We believe that we're creating a new and novel solution for the people of Ohio, and if we disclose that to the general public, then all of our competitors would understand that as well and potentially replicate it," he said.

Edwards emphasized that those responsible for Ohio Medicaid will be privy to the terms of the contract.

"It is very transparent, but to the state," he said. "They're the stewards of the taxpayers' dollars and they're the ones who really represent the people that we serve and the general public. When the announcement was made about our model, it was well received across the state. We really see (the Medicaid department) as the representative of the people we serve and the public in general."

But Linda Cahn, who writes and scrutinizes PBM contracts for a living, said state officials need to be double- and triple-checked.

"Given that Ohio has already wasted hundreds of millions of dollars from inflated prescription drug costs, Ohio state should insist on full disclosure of all contract terms — to the Medicaid office, to the state legislature and to the public, especially since taxpayers are footing the bill for terrible PBM contracts," she said.

"After all, the PBM contract is the single document that controls how much the state will pay, how much in profit spreads the PBMs will make, whether the PBM can collude with manufacturers against the state’s and Medicaid beneficiaries’ interests, what services the PBM will provide, and every other aspect of Ohio’s Medicaid prescription coverage program."