Republicans in the Ohio House unveiled a plan Thursday to give the state greater control of Medicaid pharmacy benefits and no longer leave it to private managed care companies and the pharmacy middlemen they hire.
The proposal, among a host of changes to Gov. Mike DeWine’s budget plan, comes amid ongoing concerns by lawmakers in both parties that pharmacy benefit managers, known as PBMs, are ripping off taxpayers.
PBMs such as CVS Caremark and OptumRx, which administer drug benefits in the state’s Medicaid program, have come under fire in Ohio and elsewhere for a lack of transparency as prescription drug prices continue to soar.
Under the House proposal, the Department of Administrative Services would select and contract with a single PBM to manage pharmacy benefits for the Medicaid program, instead of the PBM hired by the managed care plan. The selected PBM would act as a fiduciary for the state — meaning it would have to put the interests of Ohio taxpayers first, over their corporate coffers — and be required to pursue the lowest drug costs from manufacturers on behalf of the state.
It also would require the PBM to submit quarterly pricing reports to the Department of Medicaid, which in turn would submit findings to the General Assembly.
House Speaker Larry Householder, R-Glenford, said, “Medicaid PBM reform is long overdue and I believe this legislation will help ensure the selected PBM is working in the best interests of the taxpayers.”
Rep. Mark Romanchuk, R-Mansfield, told his colleagues on the House Finance Committee, “I’m very happy with the direction the state is taking, this legislature is taking, in cooperation with the executive branch.
“There will be a little more oversight and accountability with our managed care organizations.”
Medicaid — the state-federal taxpayer-funded health insurance program covering 2.8 million poor and disabled residents — now contracts with five private managed care plans to oversee benefits. The plans in turn each hired a PBM to decide which medications are covered, negotiate drug prices and rebates with manufacturers, and set reimbursement rates to pharmacists who fill prescriptions.
A study commissioned by Medicaid last year found PBMs billed taxpayers, through the managed care organizations, $224 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 as much as $180 million in excessive profit kept by CVS Caremark and Optum Rx, the study found.
The report said PBM fees should be in the range of 90 cents to $1.90 per prescription, but found CVS Caremark billed the state about $5.60 per script while Optum charged $6.50 — three to six times higher.
In response, Medicaid updated its managed care contracts to ban spread pricing and require PBMs to use a pass-through payment model in which they essentially are supposed to bill the state the same amount they pay pharmacists and receive an administrative fee.
But deciding that wasn’t enough, Gov. Mike DeWine in January directed the Department of Medicaid to rebid managed care contracts to crackdown on secretive and deceptive business practices benefiting PBMs at taxpayers’ expense. And just this week, Medicaid officials announced additional restrictions on PBM practices as work continues on new contracts.
If the House proposal is passed by the General Assembly and signed into law by DeWine, the governor’s order would be unnecessary as managed care companies would be forced to use the state-hired PBM.
ccandisky@dispatch.com
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