The road to PBM and pharmacy payment reform in Ohio
Last year, at the prodding of OPA and pharmacies who saw massive cuts in reimbursement over the last couple years within the Medicaid managed care program, Ohio officials called for a complete audit of the pharmacy benefits portion of the system. This was right around the time that the Columbus Dispatch began its award-winning Side Effects investigative series on PBMs and prescription drug pricing.
It was well known within the pharmacy community that the PBM cuts were severe, but when it was learned that the state was paying growing amounts for prescription drugs within the Medicaid managed care program, we had a strong belief that the audit would show massive amounts of PBM profiteering at the expense of pharmacies and taxpayers.
As we awaited the results of the Ohio audit, we learned a lot about what was happening in the Medicaid program and to local pharmacies.
- We knew that if PBMs could continue to have free rein to do as they pleased within the Medicaid system, that pharmacies would close and taxpayers would be taken advantage of.
- We were extremely concerned that the Department of Medicaid would not address the issue willingly at the time.
- The very first bit of spread pricing was exposed with an example of duloxetine back in March 2018. PBMs were receiving $1.54 per pill, but were reportedly only reimbursing pharmacies 18 cents per pill, and PBMs presumably pocketing the difference.
- Afterwards, the Department of Medicaid announced their own plans to review drug pricing in the program.
- Meanwhile, serious concerns arose over possible anti-competitive behavior in the marketplace.
- The state found that similar PBM drug pricing problems were also being found in the Ohio Bureau of Workers' Compensation program, and the feds found them in Medicare Part D.
- A Dispatch investigation showed how underpayments on generic Suboxone dried up patient access to the important addiction treatment.
- PBMs were steering lucrative oncology medications to their own specialty pharmacies.
- On June 17, 2018, the Columbus Dispatch released an in-depth analysis that revealed spread pricing for the first time, showing pharmacies being underpaid for prescription drugs, and the state being billed much higher amounts for those same drugs.
- Just days later, the Ohio Department of Medicaid released their own commissioned analysis revealing that PBMs were raking in $244 million in spread pricing over the course of just one year of Medicaid managed care prescription drug spending. It amounted to more than $6 per prescription, which was three to six times the going rate for PBM services.
As you are studying up on the "Ohio PBM problem," there are several major findings in Medicaid's commissioned PBM report from HealthPlan Data Solutions (HDS). Of note from the report:
- While PBMs were raking in three to six times the going rate for their services, pharmacies were being underpaid by more than $350 million compared to typical market rates. This amounted to pharmacies receiving nearly $9 per prescription less than they should.
- The HDS report showed that by resetting the trajectory of funds in a pass-through pricing model, the state could save $16 million while reinstituting $191 million back into the pharmacy marketplace.
- Much of the report is still redacted, due to ongoing litigation over publicly revealing its contents. This further highlights the need to move away from the opacity of the PBM-controlled system that relies on proprietary pricing and secrecy.
As lawmakers grilled Medicaid officials over the results of the HDS analysis and the findings that the state was getting a raw deal, more pharmacies reported that they were on the brink of collapse. Then-Attorney General Mike DeWine announced plans to sue PBMs over their conduct. Medicaid proceeded to cancel all PBM contracts in favor of more transparent arrangements, and shortly thereafter, then-Auditor Dave Yost released the results of his PBM audit, confirming the results of the HDS report, but with even greater detail.
The Yost audit validated the spread totals found by HDS, but it also demonstrated how a majority of the spread was occurring on generic drugs. It also showcased wild variations on spread totals from county to county. The audit also showed that 371 pharmacies had closed in Ohio within the last five years. Again, as state officials digested the results, Ohio pharmacies continued to close and struggle.
Both gubernatorial candidates pledged further reform heading into the November 2018 election, and after Governor Mike DeWine was elected, plans were underway to prohibit spread pricing and require full transparency in PBM drug pricing. The prevailing thought from the Department of Medicaid was that this pass-through pricing would begin to alleviate pharmacy reimbursement pressure heading into 2019.
It didn't. And just one week into 2019, Ritzman's Pharmacies were purchased by CVS Health, and it was announced that CVS would be closing 17 of the 20 locations. Patients and pharmacy employees all across Northeast Ohio were left stranded, just like the 371 pharmacies that closed before them.
A month later, Governor DeWine announced that he would rebid all of the Medicaid managed care contracts, largely due to the problems identified in the PBM space.
However, despite learning about more shady reimbursement practices on OTC medications and specialty drugs, and despite more pharmacy closures, the state and the Department of Medicaid have still failed to address PBM pricing autonomy and the ongoing pharmacy payment issues within the Medicaid program. Pharmacies continue to cut back and close their doors, all at the expense of quality care and access.
Even today, three years removed from bringing this PBM issue to the Department of Medicaid and 18 months after the Ohio PBM controversy really started, we still don't know how much pharmacies are being paid, how much PBMs are being paid, and just where Medicaid pharmacy dollars are going. And PBMs still have complete control of the levers of prescription drug pricing, and unsurprisingly, pricing distortions, red flags, and problems persist.
It is time for the abuse of the pharmacy marketplace to end, and it is time to set pharmacists on a course for a better incentive system, so that they can be better positioned than they are today to yield positive patient outcomes.
Please contact your elected state officials, and ask for their support to fix Ohio's broken pharmacy payment system and end state overspending on prescription drugs, and secure local pharmacy access in Ohio's communities.