New 'transparent' Medicaid pharmacy contract quickly withdrawn
June 3, 2019
Second verse same as the first?
Ohio's largest Medicaid managed-care provider promised unprecedented transparency earlier this year as it dropped its pharmacy middleman, CVS, and hired a new one. But until the new contract by middleman Express Scripts was abruptly pulled back last week, it bore many of the features of earlier deals that cost taxpayers more than a quarter billion dollars a year in markups and that community pharmacists said were driving them out of business.
On Wednesday, Express Scripts sent new contracts to the pharmacies serving the 1.2 million Medicaid patients overseen by Dayton-based CareSource and gave them just 20 days to decide whether to take the deal, which would start on Jan. 1.
Many Ohio pharmacists, particularly those with large numbers of Medicaid patients, say it isn't much of a negotiation. Unless they can survive without that business, they say they have to sign whatever deal the middlemen put in front of them. They have complained for more than a year that those reimbursements are below their costs and could put them out of business.
Express Scripts' first foray into Ohio's Medicaid managed-care world bodes no better. The contract it sent out offered to pay pharmacies a dispensing fee of just 15 cents per prescription in 2020. That would slide to 10 cents in 2021 and a nickel in 2022.
Just the fee to enter a transaction into a computer — a fee that would go to Express Scripts — so a pharmacy could get paid for filling a prescription is more than that, said Nnodum Iheme, whose Ziks Family Pharmacy in Dayton gets 70 percent of its business from the CareSource Medicaid managed-care plan.
"I also have to pay employees, print labels, buy bottles, pay for electricity," Iheme said. "If we accept this contract, we might just as well sell the pharmacy and move away."
Ohio pharmacists say that to make ends meet, they need to receive about $10 per prescription above the cost of buying a drug — not 15 cents.
The backlash from across the state to the contract sent by Express Scripts was intense, said Antonio Ciaccia of the Ohio Pharmacists Association.
By Thursday, the contract was withdrawn.
"You recently received a communication from Express Scripts Inc. ("ESI") related to CareSource ("Sponsor")," the fax said. "Please disregard that communication."
Express Scripts didn't say what prompted the company to issue the contract and then rescind it a day later. Brian Henry, a spokesman, said that his company works through contract terms with pharmacies in its network.
"Normally, those negotiations are done between us and the pharmacies, and we work together until we get to rates and agreements that work for both," Henry said. "Pharmacies have the right to accept, reject or negotiate our contract offers, based on what works best for them. We remain committed to appropriately compensating pharmacies for the value they bring to our members and our clients."
The Ohio Department of Medicaid, which says it is committed to bringing transparency to the way Ohio buys Medicaid drugs, didn't comment for this story.
In its comments, CareSource didn't answer questions about the method that Express Scripts' contract would use to price Medicaid drugs — from its self-generated "maximum allowable cost" lists.
Such "MAC" lists have been implicated in the lack of transparency that has been blamed for problems with the Ohio Medicaid program. A Dispatch investigation last year prompted a state investigation, which found that MAC lists were used in 2017 when CVS and OptumRx billed taxpayers far more for prescription drugs than they paid pharmacies.
The Medicaid department initially set the amount at $224 million. But it then revealed that one managed-care organization paid an additional $20 million in markups, so the total amount was really $244 million.
The markups were possible, critics said, in part because MAC pricing gives pharmacy middlemen control over drug prices.
"They manipulate that MAC value anytime they want," said Andy Becker, director of pharmacy administration for Fruth Pharmacy, which owns 31 stores in southeastern Ohio, West Virginia and Kentucky.
CareSource was asked whether it would allow Express Scripts to use MAC pricing, as the middleman had tried to do in its short-lived contract offer. CareSource also was asked whether it would require Express Scripts to show how it created the lists and to provide enough data to show that the middleman wasn't unfairly advantaging its own mail-order pharmacies. CareSource didn't answer directly.
“Our goal at CareSource is to better serve our members and partners," CareSource Senior Vice President Clayton Edwards said in an email. "Since CareSource RxInnovations announced our pharmacy innovation partnership with Express Scripts (ESI) we’ve been committed to protecting independent and small pharmacies and the important role they play in patient care. We are in the early stages of working with ESI to develop the details for how we will contract with the pharmacy network in preparation for the transition on January 1, 2020."
CareSource also didn't respond when asked whether it would require Express Scripts to base its prices on lists that are available to the public, such as the National Average Drug Acquisition Cost list, which is maintained by the federal government.
Ciaccia, of the pharmacists association, said that's highly preferable to allowing pharmacy benefit managers such as Express Scripts to reimburse pharmacies based on prices the PBMs decide.
"We need to strip the ability of the vendor who profits from the price to set the price," he said.
Express Scripts took its first step into Ohio's $2.5 billion Medicaid managed-care drug marketplace last week and then quickly withdrew it. It was an inauspicious beginning, Iheme said.
'"At this moment, it's not very encouraging," he said.