Report on pharmacy middleman pricing to stay secret -- for now

July 17, 2018

Plans to release a report documenting the costly practices of pharmacy middlemen were shelved by Ohio Medicaid officials on Tuesday at the request of a judge reviewing claims by CVS Caremark that the analysis contains confidential information and trade secrets.

Franklin County Common Pleas Judge Jenifer French asked for the delay to allow CVS Caremark time to identify information in the 51-page report that it considers proprietary and believes should be redacted before the report is released to the public and lawmakers.

French did not rule on CVS’ request for a temporary restraining order to block the report's planned release late Tuesday afternoon. Instead, she ordered Medicaid and CVS officials back to court on July 25 after they’ve had a chance to discuss the concerns. She also asked to privately review a copy, which shows higher-than-industry costs paid by taxpayers to cover Medicaid patients' drugs.

"I would like the parties to sit down ... and hopefully reach some agreement on what can or cannot be disclosed," French said.

During the 30-minute hearing, CVS attorney Kevin R. McDermott told French, "This is a classic trade secret, proprietary information case.”

“What’s baffling here is ... this information was accepted by the Department of Medicaid to be confidential (until their) sudden change of position Friday,” he said.

“There is something wrong here. There’s just something wrong. Every step of the way this was received and treated as confidential ... This report should be withheld until trade secrets can be expunged.”

At the request of The Dispatch, Ohio Auditor Dave Yost and some lawmakers, and over the objections of CVS, Medicaid officials announced Friday that they would reverse an earlier decision and release the report. In June, they provided only an executive summary, arguing that the full report contained proprietary information.

Sources involved with the discussions between Medicaid and Yost's office said there was an agreement in place to release the full report to the auditor last week. Medicaid officials changed course on Friday and decided to release the entire report to the public.

CVS went to court Monday to block the release of the commissioned report, which cost $50,000.

Dennis Hetzel, executive director of the Ohio News Media Association, said keeping vital information such as health care costs from the public is inappropriate.

"The confidential trade secret exemption is one of the most abused section of Ohio’s open records law," Hetzel said. "This matter is so obviously in the public interest that it has to transcend any potential damage CVS might claim."

According to the executive summary, pharmacy benefit managers, or 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, known as the price spread, represents millions kept by CVS Caremark, PBM for four of Medicaid's five managed care plans, and Optum Rx, the PBM for the other. Largely pass-through operations, PBMs are employed to negotiate drug prices with manufacturers and process drug claims.

The study said PBM 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.

Assistant Attorney General Ara Mekhjian, representing the Department of Medicaid, told French that state officials are trying to be as transparent as possible and believe they are obligated to release the report under public records law. He said he does not believe the report includes trade secrets.

>>Don't miss our Reddit AMA from July 17, 2018 with reporters Marty Schladen, Cathy Candisky and Lucas Sullivan about the Side Effects series and the rising cost of prescription drugs.  Find it here

“The public interest favors disclosure. Prescription drug prices are increasing faster than the cost of other components of the health care market ... people don’t understand the prices that are being paid because companies are trying to lock those things up" as trade secrets.

State Sen. Bill Coley, R-West Chester, said the full report must be released to the public. He said anything less than complete transparency by Medicaid and CVS Caremark is unacceptable.

"We won't condone it," he said. "If your business model is based on keeping these numbers secret from the public, then you have a bad business model."

Sen. Vernon Sykes, D-Akron, also criticized efforts by CVS Caremark to prevent the release of a report.

“For too long, pharmacy benefit managers have operated in the shadows with very little oversight. Releasing this report will help to bring their actions to light,” Sykes said. “CVS Caremark claims they are trying to protect proprietary information, but what they’re really worried about is Ohioans realizing how badly they’re getting ripped off.”