October 31, 2018

Medicaid officials have launched an investigation and lawmakers are threatening legislation after The Dispatch presented the state officials with more evidence that CVS Caremark is charging taxpayers more than what its paying pharmacists to fill Medicaid prescriptions.

Information provided by several Ohio pharmacists to The Dispatch in the past week shows that CVS Caremark has again drastically reduced what it's reimbursing pharmacists to fill prescriptions for Ohio's poorest residents.

The significance: The state is paying a flat rate for medications, meaning CVS Caremark is pocketing more taxpayer money when the pharmacy benefit manager slashes what it's giving to Ohio druggists. The CVS move to increase what's called spread pricing comes barely two months before the state Medicaid agency outlaws the practice in Ohio.

“Any attempt by CVS to take advantage of the spread model contract over these last few months is wholly unacceptable and we have demanded that CVS immediately restore price changes,” said Tom Betti, spokesman for Medicaid.

Betti said Medicaid officials launched an investigation as soon as they learned of the price changes.

Within hours, CVS reversed its defense of the rates it pays and announced it would increase reimbursements to pharmacies.

"As part of our ongoing monitoring of the marketplace to set appropriate reimbursement rates based on drug acquisition costs that fluctuate regularly, we’ve determined that the drug mix being dispensed at certain pharmacies in Ohio is having a disproportionate impact on their generic reimbursement. To address this, CVS Caremark is increasing the reimbursement rate in Ohio within the generic basket of drugs," company spokesman Michael DeAngelis said in an email to the Dispatch.

Earlier, DeAngelis said the company uses several lists, which it doesn’t make public, to set drug prices and reimbursements to pharmacists.

Two sources aware of the discussions said Medicaid had given CVS Caremark a deadline of Thursday to explain its actions.

In one instance, a community pharmacist reported he was paid $5.64 by CVS Caremark per Medicaid prescription in the month of September. In the first half of October the price was about $2.50 a prescription.

Last week: a $2.43 loss per Medicaid prescription.

DeAngelis said Tuesday that CVS Caremark has helped save Ohioans millions by monitoring these prices.

But pharmacists across Ohio say CVS Caremark’s practices are hurting them.

Wilmington pharmacist Mark Kratzer said he was paid on average $2.10 above cost for each of the 867 prescriptions he filled for Medicaid patients in September.

So far in October, he’s been reimbursed at a 66-cent loss for each of the 1,064 Medicaid prescriptions he’s filled; a total loss of $702.

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On one prescription alone, Mesalamine, a generic anti-inflammatory drug thah treats ulcerative colitis, Kratzer said he was paid $412 below the cost of the medication. He attributed the loss to a $200 increase in the cost of the drug at the same time Medicaid reimbursements were slashed by roughly the same amount.

“How do you make that up when every Medicaid prescription is a loss?” Kratzer asked. “When I noticed the big drops in reimbursements this month it was like an anniversary. The same thing happened last October.”

Kratzer said the losses are taking a toll and he may have to sell his store, Kratzer’s Hometown Pharmacy.

“I’ve been asked by my son why do you not fill Medicaid prescriptions? I do it because the more volume I have, the higher the value my pharmacy if I have to sell. I don’t want to, but I’m considering selling. What alternative do I have?”

One Cleveland pharmacist, who spoke only on the condition he note be named for fear of business repercussions, said it's past time for state officials to cut ties with CVS Caremark.

“We’re getting hammered,” he said.

So far in October, he said he was paid 17 cents over cost per prescription by CVS Caremark. For one drug, Enoxaparin, a generic medication to treat pulmonary embolism, he was reimbursed $332 — down from $628 in September.

“They are out to eliminate the competition. They can change prices whenever they want,” he said of CVS Caremark, whose parent company owns the CVS retail drug store chain.

“Everyone knows what’s happening but no one does anything. When they are the last man standing, we’re all going to pay more.”

The numbers provided by pharmacists show the drastic cuts to pharmacists in the past two weeks by CVS Caremark mirror nearly to the penny what the pharmacy benefit manager did at this time last year.

Those actions last year were one catalyst to a year-long Dispatch investigation of the drug-supply chain that help prompt numerous reforms by lawmakers and an order from Medicaid to the managed-care companies that operate the program to terminate its contracts with pharmacy benefit managers and implement new, more transparent ones by January 1.

State Rep. Scott Lipps, R-Franklin, called CVS Caremark’s actions “a travesty” and said the company has betrayed taxpayers. Lipps, vice chair of the House Finance Committee, said he will draft a bill carving out pharmacy benefit managers altogether if the five companies that oversee the care for Medicaid patients don’t take action.

“We are no longer going to accept the tail wagging the dog,” he said. “I am holding the managed care companies responsible for doing something and if they don’t I will put forward a bill to carve out (pharmacy benefit managers) and I will get a bill passed.”

There are five companies that manage the care for the more than 3 million poor Ohioans on Medicaid. CVS Caremark is the pharmacy benefit manager hired by four of the five managed care plans to keep drug costs in check.

These revelations come after a year-long project by the Dispatch called Side Effects, which has focused on PBMs and their impact on drug prices. They have significant impact on the prices all of us pay for drugs.

Pharmacy benefit managers have surged in power in the marketplace over the past 15 years. They now earn $400 billion annually by being the middleman in the drug-supply chain.

They make significant money by negotiating one price with drug manufactures and then another price they pay to pharmacists to dispense those drugs. The difference in those numbers is called the spread.

The PBMs also charge pharmacists fees to process prescriptions, usually under 50 cents a prescription.

The Dispatch earlier this year analyzed data from 40 pharmacies across Ohio that found CVS Caremark charged Medicaid 12 percent more for drugs in 2017 than it paid pharmacies. An audit commissioned by Medicaid determined the spread to be 8 percent. It found PBMs took $224 million in spread to manage prescriptions for Medicaid in one year, three to six times the standard rate.

Medicaid plans to have a more transparent pass-through model in January 1. Betti said the pass-through model will allow Medicaid to review the reimbursements to pharmacists and question PBMs if auditors see swings in prices.

“This reinforces the importance of transparency and is why we took aggressive action to ensure full transparency by implementing a new drug pricing model to ensure that Medicaid enrollees have access to quality health care, including pharmacy benefits, at the best possible price for Ohio taxpayers,” Betti said.

Ohio Attorney General Mike DeWine has threatened a lawsuit to recoup taxpayer dollars from CVS Caremark but has yet to follow through on that threat.

Antonio Ciaccia, the lobbyist for the Ohio Pharmacists Association, said CVS Caremark’s actions are causing more pharmacies to close or forcing them to sell to bigger companies like CVS.

“Enough is enough,” he said. “Right now (pharmacists) are cancelling plans for staff Christmas bonuses and raises. They’re forgoing their own paychecks and laying off employees.”