Side Effects

Senate budget strips PBM changes sought by House

June 12, 2019

Majority Republicans in the Ohio Senate on Wednesday stripped from the House-passed budget provisions that would give the state more control of private pharmacy benefit managers in the Medicaid program.

But GOP leaders said they are not abandoning efforts to protect tax dollars and reign in prescription drug prices in the health insurance program for the poor and disabled. They just prefer a different approach, they said.

“I think we all recognize this is an issue that needs to be solved. We’re all focused on the same thing … lay the groundwork with the administration so some of these problems can be dealt with,” said Senate President Larry Obhof, R-Medina.

Pharmacy benefit managers, known as PBMs and including companies such as CVS Caremark and OptumRx, have come under scrutiny in Ohio and elsewhere for lack of transparency in drug pricing as prescription costs soar. A study commissioned by the state last year found that PBMs billed the state $244 million more in a single year than they reimbursed pharmacies to dispense medications, keeping the difference.

After taking office in January, Gov. Mike DeWine pledged to combat the problem and ordered Medicaid officials to rebid contracts with the private managed care companies that hire PBMs.

The House budget passed last month and sent to the Senate for review included several reforms, including one that would require the Department of Administrative Services to contract with a single PBM, instead of managed care companies that hire their own PBMs.

Senate Finance Chairman Matt Dolan, R-Chagrin Falls, said that senators did not want to undermine administration efforts.

“We were presented with an option by the House that gave concern. While their intent is the same — to be transparent, keep prices low and (provide) options for consumers — I think there was concern about the execution of it essentially through a monopoly," Dolan said.

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“The language we have is a work in progress. It recognizes Medicaid has a responsibility to make sure that it’s transparent, make sure it is competitive and make sure we are providing benefits statewide. ... We are trying to respect that the governor is going through a re-procurement process next year and, in order for us to the get the best out of the re-procurement, we need to allow the administration as much flexibility going forward."

Rep. Scott Lipps, R-Franklin, a leading advocate for PBM reform, noted that two measures in the House budget remained in the Senate version. One would prevent PBMs from clawing back most money from pharmacists after a transaction has been completed, and one would ban PBMs from penalizing pharmacists for telling customers they'd save money buying a drug without using their insurance.

"As for the other PBM pieces that were stripped out, in my heart, I do not believe the Senate is supporting the greed the PBM industry has put on the state of Ohio," Lipps said. "I believe this is a bargaining chip, or just a negotiating tool, and I believe you'll see everybody at the table trying to protect Ohio's Medicaid recipients and Ohio's Medicaid program."

Sen. Dave Burke, R-Marysville, said he continues to look at establishing a set reimbursement rate for pharmacies. "You are not going to fix the problem unless you remediate the payment methodology," he said.

Dan Tierney, DeWine's spokesman, didn't answer directly when asked whether the governor supports PBM reforms proposed by the House or the Senate.

"Regardless of legislation, the governor and ODM are committed to address these issues and strengthen protections for tax dollars through the procurement of new Medicaid managed care contracts, which the governor asked to start in February. The governor’s goal is to make sure we prevent abuse of tax dollars and get the best deal possible for taxpayers," Tierney said in an email.

Antonio Ciaccia, spokesman for the Ohio Pharmacists Association, said neither chamber has gone far enough to address PBM practices that are driving independent pharmacists out of business.

"The House PBM proposals were understandable and sought to get a better handle on how PBMs operate in the Ohio Medicaid program," he said in an email. "While we had some concerns over the language, it was at least a meaningful policy attempt. The Senate version appears to walk that back without putting anything curative in its place. The fact of the matter is that neither chamber has fully addressed the core of the problem, which is PBMs maintaining the unrestrained ability to set prices in the Medicaid system."

Dispatch reporter Randy Ludlow contributed to this story