June 2, 2019

“Transparency” was the key word for two waves of reforms to Ohio’s pharmacy benefit managers that took effect in July 2018 and January 2019.

But nearly a year later, it has become apparent that the moves touted to expose the hundreds of millions of taxpayer dollars flowing to the middlemen in the Medicaid drug supply chain actually have done the opposite: Ohioans will go more than a year without knowing how much PBMs are making from the taxpayer-funded system.

“This doesn’t give us a full transparent look at what’s going on,” said state Rep. Mark Romanchuk, a member of the legislature’s Joint Medicaid Oversight Committee.

The Mansfield Republican lamented the disappearance of information that sparked sweeping changes in Ohio and elsewhere on prescription drug pricing following the March 2018 launch of The Dispatch’s ongoing “Side Effects” investigative series, available online at Dispatch.com/sideeffects.

“That erases that crumb trail that got us to where we are today,” Romanchuk said.

What happened?

Two things. First, Medicaid officials came up with a new interpretation this year of federal guidelines and stopped reporting PBM revenue to the federal Centers for Medicare and Medicaid Services after having done so for years. That change affected data for the latter half of 2018.

Second, Medicaid implemented a new “transparent” model starting in January that did not require PBM revenue to be tracked in the $3 billion spent annually on drugs for Ohio’s disabled and poor residents. Medicaid officials hope to correct that shortcoming, but data won’t be available until July at the earliest.

What’s the impact of not having this information?

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“That data is what has blown everything open,” said Antonio Ciaccia of the Ohio Pharmacists Association. “The one thing we had to show what PBMs made was taken away.

“It was the only public line of sight into PBM pricing practices. It would be incredibly unfortunate if the trail that we followed to expose this problem all of a sudden disappeared and that public line of sight was completely eliminated.”

If Ohio officials had used the current method of reporting what Medicaid was spending on prescription drugs, Ciaccia said, a number of things probably would never have happened: the revelations about pharmacy benefit managers' big profits at the expense of Ohio taxpayers and pharmacies, legal action by the attorney general, a special state audit, the raft of state hearings and legislation, the reorganization of managed care ordered by the governor, the impact on states across the country, and even the proposed reforms at the federal level.

The new laments contrast sharply with the promises of Medicaid officials last year under the administration of Gov. John Kasich.

“We intend to open the black box,” a Medicaid spokesman said then.

"We are seeking maximum transparency. ... Transparency around pharmacy costs is a national issue, and Ohio is one of the first states in the country to adopt a transparent pass-through model in Medicaid managed care.”

Romanchuk said Medicaid has fallen short of fulfilling its pledge of openness.

“When I heard ‘transparent model,’ every transaction from manufacturing the drug to the price paid by bythe state would have to be disclosed,” the legislator said.

Current Medicaid Director Maureen Corcoran said the problem will be fixed — but not until after data from the current quarter, which ends June 30, can be analyzed.

She said she understands that Ohioans might be frustrated by the lack of information, given past assurances.

"Frankly, it’s also why Americans across the country generally are frustrated with (drug) prices. ... It doesn’t make a lot of sense to a lot of consumers," Corcoran said.

The new era of transparency was supposed to start July 1 of last year. In an April 4, 2018, letter to the heads of the managed care organizations that administer Ohio's $25 billion Medicaid program, then-Medicaid Director Barbara Sears outlined revisions she said would ferret out whether PBMs were "tak(ing) advantage of a lack of transparency in manufacturer drug prices to engage in anti-competitive behavior that harms pharmacies." The Medicaid changes were designed "to provide greater transparency into drug pricing behavior as soon as possible," the letter said.

But now Medicaid officials say they can't tell what happened to prices charged by PBMs after those changes took effect July 1. Under Corcoran, PBM revenue no longer is being reported to the federal government as before.

"The data that we were reporting to the feds was wrong," she said. "We're not trying to hide it; we have to follow certain federal requirements around that data."

Medicaid personnel did undertake a limited study of the figures for the last half of 2018 and found indications that PBMs were getting less money and pharmacies more, but "we don't have confidence in the data," Corcoran said.

"I don't believe it's worthwhile for us to continue trying to torture that data for further information since it's now an old requirement."

That's because new state requirements took effect Jan. 1 that revamped how PBMs are paid. However, an analysis of the impact of those requirements on money flowing to the PBMs won't be conducted until at least July, she said.

Meanwhile, even more mandates are kicking in on July 1 in an attempt to, yes, bring more transparency.

Despite the delays, Corcoran said she thinks the state is now aggressively pursing PBM cost information.

"We’re trying to get visibility into a very complex set of components into the supply chain of drugs in an industry that is shrouded in a lot of secrecy," she said.

The pharmacy association's Ciaccia said the lack of information from the changes made for the final half of 2018 is a significant shortcoming. Without that data, he wondered, how can the state tell whether what it did beginning in 2019 had an impact?

"We have gone from knowing the collective margins of both the PBM and the pharmacies to having full transparency on what pharmacies are paid and no transparency on what PBMs are paid. It’s the opposite of what is needed," he said.

Sen. Bill Coley, also a member of the Medicaid oversight panel, said the state must achieve true transparency on drug pricing.

"I want to be able to look down at the number going forward and see that’s how much the pharmacist got and that’s how much we paid the PBMs," he said.

"The whole thing came about because of opaqueness. And you know what? It’s time for that to end."