Ohio seeks $16m from UnitedHealth’s PBM for overcharging on drugs

DATE: February 19, 2019

Published by STAT

Ohio officials are ratcheting up their closely watched battle with pharmacy benefit managers as the state attorney general is seeking nearly $16 million from OptumRx for allegedly failing to pass along discounts for generic drugs that were purchased by a state agency.

In a Feb. 11 letter to the pharmacy benefit manager, Attorney General Dave Yost claims that Optum failed to manage the purchases and “wrongfully increased prices” to the Ohio Bureau of Workers’ Compensation between 2015 and 2018. He also noted that he considers the “overcharges” to be a “matter of considerable public significance,” and that funds sought do not include damages.

Moreover, Yost signaled still other actions are likely to be taken against PBMs.

“I am investigating PBM practices on behalf of a number of state clients and will not hesitate to pursue overcharges and fraudulent conduct. This is an important first step in this process,” Yost said in a statement. He noted the contract between Optum and the worker’s compensation agency expired last October and that a deal was subsequently reached with another PBM.

A spokesman for Optum, which is owned by UnitedHealth Group (UNH), wrote us this: “We are honored to have delivered access to more affordable prescription medications for the Ohio Bureau of Workers’ Compensation and Ohio taxpayers. We believe these allegations are without merit and are working with the State to resolve the Bureau’s concerns in accordance with the terms of our contract.”

His move, which was disclosed on Tuesday, comes after months of concern among Ohio officials over the prescription drug contracts administered by pharmacy benefit managers on behalf of the state Medicaid program and other agencies.

Last August, the state canceled contracts with Optum and CVS Caremark (CVS), for spread pricing, which are fees that PBMs paid pharmacies that they billed back to Medicaid. A report commissioned by Yost, who was state auditor at the time, found that the two PBMs reaped more than $223 million by working on behalf of state Medicaid plans during a recent 12-month period.

And last October, there were concerns about alleged “self-dealing” after Ohio officials learned that Buckeye Health Plan, which ran a Medicaid managed care plan for the state, had contracted with one of its own subsidiaries to provide pharmacy benefit services, and subsequently paid much higher fees for those services than other Medicaid managed care plans.

These episodes have prompted Ohio officials to scrutinize the numerous state contracts that are held with PBMs, whose overall role in pharmaceutical pricing is also the subject of nationwide controversy.

Pharmacy benefit managers play a crucial but largely hidden role in the pharmaceutical chain. These companies act as middlemen by negotiating prices with drug makers while creating formularies, or lists of medicines for insurance reimbursement. In the process, the pharmacy benefit managers collect rebates from the drug makers. And they also contract with pharmacies and collect various fees.

Most of the attention is focused on rebates and allegations that PBMs prompt drug makers to raise list prices in order to win formulary placements. This can raise consumer costs, since copays are tied to list prices. Another concern is the extent to which PBMs pass rebates on to health plans, although PBMs insist most rebates are passed along and that drug makers raise list prices to boost profits.

Such issues are spurring officials in still other states to raise questions.

Two months ago, Pennsylvania state auditor Eugene DePasquale recommended the state pass laws to require flat-fee pricing for compensating PBMs, allow the state to audit contracts between PBMs and pharmacy service providers, and ban gag rules so pharmacists can disclose less expensive prescriptions to customers.

He also suggested the state should consider directly managing its Medicaid drug program instead of contracting with managed-care organizations, grant oversight of contracts signed between PBMs and pharmacy services companies, and urge the Federal Trade Commission to investigate whether separation truly exists between PBMs and related entities in the supply chain.

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