West Virginia's system possible model for cheaper Medicaid drug prices

Dec. 10, 2018

Ohio is struggling to bring transparency to the $2.5 billion its Medicaid system spends through its managed-care plans on prescription drugs each year. As it does that, one of its neighbors decided to take a drastically different path: Cut out the plan managers altogether.

West Virginia's model puts health care outcomes over profits by using the West Virginia University School of Pharmacy to recommend drugs for patients. That saved the state $30 million in one year.

Could a larger state such as Ohio do the same?

Those who have run a couple of models express confidence that they can do it in Ohio. The Cleveland Clinic Pharmacies and the Ohio State University Wexner Medical Center manage their own formularies, which is the list of drugs approved by a panel of experts for patient care.

In most states that use managed care, those formularies are controlled by pharmacy benefit managers, the middlemen in the pharmacy supply chain whose stated purpose is to control prescription drug costs.

Revelations this year by The Dispatch, the legislature, the state auditor and the Ohio Department of Medicaid have shown that pharmacy benefit managers employed by the health plans are charging taxpayers three to six times the standard rate to process prescriptions. That doesn't include the large rebates PBMs such as CVS Caremark are collecting from manufacturers behind a veil of near-complete secrecy.

To determine just how good — or bad — a deal Ohioans are getting from the pharmacy-benefit managers hired by its managed-care plans, Ohio Medicaid officials are trying to get behind the many curtains that obscure what's happening. It's moving to a "pass-through" model in which PBMs must charge taxpayers exactly what they pay pharmacists, plus a set fee.

But even though the managed-care plans are supposed to work for the state, Ohio Medicaid reportedly is facing resistance from the PBMs as it tries to build in protections for non-CVS pharmacies, who report taking a beating under the existing system.

That's a headache West Virginia doesn't have to deal with. Faced with increasing costs in 2017, and already spending $650 million a year on prescription drugs, officials there decided they could do better without the plans and their hand-picked PBMs, which included CVS Caremark.

"They felt the cost was not sustainable," said Vicki Cunningham, West Virginia Medicaid's director of pharmacy services, about the position of state financial officials. So, she said, West Virginia got back to basics.

"The system we have now is the system we had before we carved pharmacy into managed care" in 2013.

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West Virginia turned to experts at the state university. They advise providers and make decisions about when it's best to use off-formulary drugs — even though they might cost more and might not come with rebates.

Because university employees aren't concerned with corporate profits, their only goal is to bring about the best health outcomes, which in the long run saves everybody money, Stevens said.

"They're clinical, well-informed individuals who make appropriate clinical decisions," he said.

However, no studies have been done to determine whether the system does work better.

Dr. Robert Weber, is the chief pharmacist and assistant dean for medical center affairs at Ohio State. He is involved with the committee at Ohio State that approves drugs to use on patients at the hospital.

Weber said it would take a "considerable increase" in resources for his group to duplicate the West Virginia model, but he said it's doable.

"Our committee is focused on how we can improve quality of care," he said. "We do not have any influence from the drug industry, no significant conflict of interests, we do not allow manufacturers to come into the institution, and the cost of the drug is the last thing we consider."

Weber said pharmacists should have a more important role in formulary design, calling them the "unsung heroes" in the drug supply chain.

The head of Cleveland Clinic Pharmacies, Scott Knoer, said his formulary committee manages drugs for pharmacy employees and their dependents much like Ohio State does for its hospital patients. Having that control has saved the group more than $33.6 million to provide health care to employees at 18 pharmacies.

"We have what I would say is a more pure form, because a PBM doing formulary placement is doing so based on rebates they get and trying to maximize their own money," Knoer said. "We research it and see what it costs and then the physicians decide if they want to add that drug, and it's not based on money."

Of course, there's no proof the West Virginia template can be used in a much larger state to administer billions of dollars worth of drug purchases. In a meeting with The Dispatch this year, top officials with the Ohio Department of Medicaid said they didn't think it could.

However, Cunningham, of the West Virginia Medicaid program, said she didn't see the difficulty of scaling up.

"You have to provide the same things if you have one person or 100,000," she said. She added that the West Virginia process actually has been streamlined.

"Instead of five separate systems, we're only paying for one," she said.

When managed-care companies hire pharmacy benefit managers on behalf of states, they're buying a suite of services.

Think of it as if you were buying a bundle including internet, telephone and cable. With a PBM, the bundle includes determining what a drug should cost at a given time, negotiating dispensing fees with pharmacies, creating a system so Medicaid can be billed and pharmacists paid, creating the list of allowable drugs, and forming a group to give the OK to pay for drugs that aren't on that list.

West Virginia officials have un-bundled that package. They use private-company contractors to handle some of the services and the West Virginia University School of Pharmacy's Rational Drug Therapy Program to approve the use of non-formulary drugs and to consult with doctors and pharmacists.

Experts have told The Dispatch that the bundled services of a pharmacy benefit manager are convenient, but they operate behind so many layers of secrecy that it's hard to know whether they're providing customers the great deals they describe. By breaking apart the package into its component services, West Virginia has much greater insight into each.

For example, PBMs use their size to extract big discounts from drug manufacturers, but the deals are confidential. West Virginia uses the Sovereign States Drug Consortium — a group of states that leverages rebates. The individual rebates still are confidential, but West Virginia collects them all. Cunningham said she had no way of knowing whether that was the case when PBMs were collecting the rebates.