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Ohio Medicaid announces plans for significant reforms to pharmacy program

Today, the Ohio Department of Medicaid announced sweeping changes to the way pharmacy benefits are administered in the Medicaid managed care program. Those changes are aimed squarely at the opaque black box of pharmacy benefit managers (PBMs), who have been under intense scrutiny after it was discovered that they had been skimming hundreds of millions of dollars off the program through previously-hidden spread pricing tactics.

As for the details, Ohio Medicaid announced that they are requiring its five managed care plans to terminate contracts with pharmacy benefit managers (PBMs) based on “spread” pricing, adopt new practices based on a transparent “pass-through” pricing model and enter into new contracts with vendors who can provide services based on that model.

A pass-through model allows Ohio Medicaid, Ohioans and all market participants to see exactly what is paid out for all pharmacy transactions. Finally, at least in this one program, we will have complete transparency.

“The black box will effectively be eliminated.”
- Patrick Stephan, Ohio Department of Medicaid

Ohio Medicaid will move to a pass-through pricing model effective January 1, 2019. Ohio Medicaid and the plans will now:

  • Design the new pass-through pricing program ahead of the annual Medicaid managed care rate setting process in November;
  • Conduct the actuarial analyses necessary to achieve budget neutrality;
  • Complete Ohio Medicaid’s annual survey of pharmacy dispensing costs as required by Ohio Revised Code 5164.752; and
  • Update PBM contracts as needed and provide sufficient time for contract negotiations.

Medicaid's announcement comes on the heels of significant work by OPA to call attention to the growing divide between what pharmacies have been paid through the program, and what the state was getting charged for those same prescriptions. OPA's advocacy eventually caught the attention of lawmakers, media, and state agencies, and has now snowballed into a major push for reform. And to their credit, Ohio Medicaid has taken the ball and run with it, and their proposed reforms will serve as a national model for what other states can do to eliminate wasteful spending in their pharmacy programs.

Of course, it cannot be overstated that none of this change could have occurred without the incredible investigative work of the team at the Columbus Dispatch, who put this issue on the map nationally. The team of Darrel Rowland, Cathy Candisky, Marty Schladen, Lucas Sullivan, and the rest of their hard-working supporting cast have been nothing short of amazing in their relentless pursuit of the facts. To view the 40+ stories that they have pieced together since they began months ago, see their special Side Effects page HERE.

The Dispatch story regarding Medicaid's announcement can also be viewed HERE.

Today, almost every major statewide office-seeker in Ohio, including both major gubernatorial candidates, have called for reforms to the broken PBM model. Auditor Dave Yost has been digging into the issue and plans to release his findings to the Joint Medicaid Oversight Committee on Thursday at 9:00 AM. Ohio Attorney General Mike DeWine recently announced his intention to sue PBMs in an effort to demand accountability.

In the Ohio House, Representatives Scott Lipps, Thomas West, Kyle Koehler, Mark Romanchuk, Jim Butler, Kirk Schuring, Wes Retherford, Scott Ryan, Steve Huffman, Robert Sprague, Tim Ginter, Tom Patton, Nino Vitale, Terry Johnson, Gary Scherer, Andy Thompson, Keith Faber, Jack Cera, Jay Edwards, Brian Hill, Emilia Sykes, Tavia Galonski, and Speaker of the House Ryan Smith have all been supportive of transparency and reform in recent years. In the other chamber, Senators Bill Coley, Lou Terhar, Bob Hackett, Gayle Manning, Joe Schiavoni, Joe Uecker, Bob Peterson, Troy Balderson, Mike Skindell, Dave Burke, Vernon Sykes, Scott Oelslager, and Senate President Larry Obhof have as well. Before them, former Representative Tim Brown and former Speaker of the House Cliff Rosenberger were passionate advocates for PBM transparency, specifically in the realm of subjectively set generic pricing benchmarks and spread pricing.

Let's be clear. None of this happens without the many pharmacists who have been speaking out on this issue. It is unfortunate that so many pharmacies had to close their doors in order to arrive at these policy steps. Our most recent closure was OPA Past President Bob Blake's pharmacy in Manchester, Ohio. Their community has now lost its only pharmacy, and patients will now need to travel more than two towns away or across the state line into Kentucky in order to access a pharmacist. That's just one example out of hundreds of pharmacy closures over the last three years.

"The Kasich administration and the Ohio Department of Medicaid’s progress on PBM transparency will create a more efficient program, and serve as a national model for other states that have also been grappling for ways to get drug spending under control," said OPA Executive Director Ernie Boyd. "The federal government has been talking about pushing for meaningful PBM reform, and Ohio is showing how it can be done. We applaud the Department’s actions and believe this is the correct ‘next step’ for true prescription drug spending reform."

"Our hope is that with transparency comes the needed reforms to ensure a healthy, competitive pharmacy marketplace that keeps costs in check and maintains strong access and choice for all Ohioans," said OPA Director of Government Affairs Antonio Ciaccia.

OPA applauds the work of Governor Kasich, Medicaid director Barb Sears, Medicaid managed care director Patrick Stephan, and the rest of the Medicaid team. We will continue to work with them, as well as lawmakers, to create the best pharmacy program possible: one that keeps drug costs in check, maintains diverse patient options, and drives superior value through pharmacist services.

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