AG sues Pharmacy Benefit Manager OptumRx for allegedly overcharging Ohio $16M

Ohio Statehouse Newsroom

COLUMBUS (WCMH) — Ohio State Attorney General Dave Yost gave OptumRx 30 days to settle a dispute over billing.

He says those 30 days have gone by and their time is up; now he is taking them to court to get State taxpayer dollars back.

This all stemmed from an investigation into what Ohio was being charged for one of its Medicaid Managed Care accounts.

Allegedly OptumRx told the State it was going to save a bunch of money with a discount on drug prices, but when it came time to bill the State was charged a different, higher, amount.

How much higher? According to the Attorney General’s Office between January 1, 2015 and October 27, 2018, the state was overcharged $15,843,112.

The overcharges were on generic drugs purchased by the Bureau of Workers Compensation.

What many people don’t know is how much a drug costs changes over time.

As a name brand drug’s patent comes to an end and its recipe becomes available to other drug manufacturers, generic versions of it start to be produced.

That, over time, drives the price per unit down to next to nothing. Riding that slide down are the Pharmacy Benefit Managers, according to Antonio Ciaccia with the Ohio Pharmacists Association.

Ciaccia says, as the price drops PBM’s will buoy the charge rate at a higher cost with a slower decline than what is really happening.

Here’s an example: Generic Gleevec, which is called Imatinib Mesylate 400mg, is a leukemia drug that a patient will take for the rest of their lives. It recently transitioned from a name brand drug to a generic one that is supposed to cost less.

In Q2 2016, the National Average Drug Acquisition Cost (NADAC) was $297.86/pill, and Ohio was being charged $319.28. 

By Q4 2017, the NADAC was $116.22, and Ohio was being charged $240.03.

Generic drugs are where states like Ohio are supposed to be able to find savings, but with PBM’s operating in this fashion, it has not seen the kind of savings it could have.

Ciaccia says what happened to the state on the front end is similar to what happens to patients on the back end of the drug transaction.

When a patient drops off a prescription at the pharmacy, the pharmacist puts all the info into the computer program and it gets shipped off to the health insurance company for their approval.

That non-negotiable amount the pharmacist is supposed to charge if insurance is used is sent back to them to submit to the patient.

Meanwhile, the PBM will have already cut a deal with the insurer for how much to charge.

After the pharmacist completes the transaction with the patient, the PBM will come in and tell the pharmacist they need to send a portion of the cost of the medication to them; this is called a clawback.

The real value of the drug that patient bought is less than what they paid for it. The entire clawback amount goes to the PBM and the money that is left over for the pharmacist is just enough to cover the cost of the drug itself and in some cases not even that.

You may be asking yourself, why would a pharmacist allow that to happen? Ciaccia says they don’t have a choice.

Three PBM’s represent 85% of the patients in the United States, and have a stranglehold on the market.

Those PBM’s are OptumRx, Express Scripts, and CVS Caremark. CVS Caremark’s parent company is CVS Health which owns the CVS Pharmacies subsidiary.

Because the three main PBM’s represent so many people, they can use that weight to leverage whatever they want; and they have by creating gag-orders that prevent pharmacists from telling you what’s going on.

That is only one reason why a PBM could get away with buoying a drug price and overcharging a state. Another reason is the entire drug pricing process is highly complex and all of the players have something to lose if it ever becomes completely transparent.

“There’s this really complicated mess of a supply chain that goes from drug manufacturer all the way back down to the patient, and so the drug goes through this meat grinder process of price, and so we as onlookers, as consumers, have no idea what that price ‘should be,’ so you’re supposed to defer to your PBM to give you some expertise and give you a deal, but they’re actually taking advantage of the complicated nature of the transaction,” said Ciaccia.  

From the top down, almost every part of the prescription drug supply chain is a member of the Fortune 100.

“Everybody is big and fat in the drug supply chain, right now. Everybody is in on the take; you have your drug makers, you have your wholesalers, you’ve got big pharmacies, you’ve got insurance companies, and you’ve got PBM’s; every single member of the supply chain is represented in the Fortune 50 list,” said Ciaccia. “So whenever those revenues are exposed, whenever there’s transparency, that puts all those members at risk; and so everybody [in the supply chain] stands to benefit when the drug prices, and what’s true, is hidden.”

As for Ohio, the contract it had with OptumRx ran out in October and the BWC has since contracted with a different PBM.

The state continues to investigate the practices of PBM’s in the state and have been receiving help from the Governor’s office in doing so.

Monday, Governor Mike DeWine’s office released this statement:

“Attorney General Yost and his litigation team have continued working on investigating PBM contracts in Ohio and, through this lawsuit, are alleging the state was charged more than contractually allowed. My administration will continue to provide any information, documents, and data the Attorney General needs in his continued investigation of PBMs.”

At the statehouse, legislation has been introduced for the second time that would eliminate clawbacks from being possible here in Ohio.

The bill failed to complete its legislative journey last year but came up just short, failed due to a lack of time and a different set of priorities pursued during the lame duck session.

This General Assembly, the bill’s sponsors are quite confident they can get the legislation passed with plenty of time to spare.

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