The state of Ohio has cut pharmacy benefit managers out of its Medicaid program and instructed insurance providers to enter new contracts by Jan. 1, 2019.
The new contracts must be a “transparent pass-through pricing model,” Ohio Medicaid stated in a tweet.
CVS Caremark, the pharmacy benefit manager (PBM) subsidiary of CVS Health, contracts with four of the five Medicaid plans in Ohio, which are contracted through private insurance companies. PBMs negotiate prices and process pharmacy claims and are often called the middle men of the prescription drug system. PBMs have recently come under more scrutiny and drug prices have steadily increased over the last several years and lawmakers have looked for ways to reduce costs.
“Ohio Medicaid’s focus is to ensure that Medicaid enrollees have access to quality health care, including pharmacy benefits, and taxpayers get a fair price. Therefore, we are now taking aggressive action to ensure full transparency for the greater good of the public interest,” the department said in a statement.
CVS Caremark and OptumRx managed $2.5 billion in 2017, Dayton Daily News reported.
“CVS Health is actively working with its Ohio Managed Medicaid clients to restructure its contracts to implement the Ohio Department of Medicaid's new "pass-through" pricing model requirement, effective Jan. 1, 2019,” CVS said in a statement.
The company said it saved Ohio taxpayers $145 million annually through its services. However, the PBM industry is well known for being opaque in its pricing. Lack of price transparency is one reason why CVS Health’s proposed merger with insurance giant Aetna should be blocked, according to the American Medical Association.
In June, CVS Caremark kept 8.7 percent of the payments it received, or $197.3 million, in Ohio, while OptumRx kept 9.4 percent, $26.4 million, Dayton Daily News reported. The June report was the first time Ohio state officials and the public knew how much the PBMs were keeping for their services, according to the news outlet.
Under the new contracts, PBMs will charge insurance companies exactly what it pays the pharmacy for medicines and dispensing fees and charge an explicit fee for administrative services. More details on how much PBMs have been keeping for different drug types are expected to be released soon.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."