By Joseph Burns
One lesson some health care journalists have learned in recent years is that the nation’s pharmacy benefit management system is incredibly complex. The sheer complexity can make it a tough beat to cover.
The nation’s handful of pharmacy benefit management (PBM) companies are the middlemen that health insurers and employers hire to oversee prescription drug benefit plans for employers and health insurers. PBMs have a remarkable array of intricate contracts with health care purchasers, meaning those employers and government agencies (Medicare, Medicaid, and the Veterans Administration, among others) that buy health care for employees and other beneficiaries. The contracts include provisions that benefit not only the PBMs but also health plans, health care buyers and pharmaceutical manufacturers.
Whether consumers benefit at all is an open question because the provisions in these contracts are mostly undisclosed.
To their credit, a team of journalists at the Columbus Dispatch newspaper in Ohio has produced an award-winning series that has pulled back the curtain that PBMs and pharma companies have used to obfuscate their dealings with each other and with health care purchasers and payers (meaning health plans).
In an ongoing string of articles, called the Side Effects series on prescription drugs, the Dispatch team has shown that a key to covering this otherwise opaque corner of the health care marketplace is to report on how the state’s Medicaid program contracts with PBMs.
That’s where the series began in January 2018. Now, over two years and more than 110 articles later, the series continues with this: “Drug middleman fires back in workers’ comp suit.”
What makes the series so interesting is that it’s about more than just pharmacy benefits in Ohio, says Cathy Candisky, one of the reporters on the team.
What’s happening with PBMs in Ohio is likely going on in other states too, says Candisky, a public affairs reporter. This is significant because when officials in one state have a problem, they look to other states for solutions.
In addition, Candisky and her colleagues have heard from state officials that questions about PBMs go beyond the Ohio Medicaid program. The gist of the series is a focus on the rising cost of prescription drugs nationwide, she says.
Other members of the team include Marty Schladen, another public affairs reporter; Darrel Rowland, the paper’s public affairs editor; and Lucas Sullivan, a projects reporter.
The first story in the series focused on the gag clauses that PBMs imposed on pharmacists that prevented them from explaining how consumers could save money by paying cash for their prescription drugs rather than use their insurance plans. Most insurers’ health benefits plans require customers to pay a certain amount out-of-pocket at the point of sale. Rather than let pharmacists offer cheaper alternatives to customers, the state’s PBMs had issued “gag orders” to keep them quiet and retained the extra money for themselves, according to the article. Following the ensuing debate, the state of Ohio and later the U.S. Congress passed laws banning such gag clauses.
One other story the team did early in 2018 began with a tip Schladen got from a source at the Ohio Pharmacists Association. The tipster explained that payments to pharmacists had dropped suddenly and that as a result, some of the biggest pharmacy companies were looking to buy retail pharmacy stores across the state.
“It turned out that those early stories were just the tip of the iceberg,” Schladen says. That article, “CVS accused of using Medicaid rolls in Ohio to push out competition,” ran in March 2018.
In the series, the Dispatch team has aimed to show not only what was happening in Ohio but that PBMs operate similarly in other states. “When we did our initial stories, we saw that there was maybe some anti-competitive behavior going on,” Sullivan says. “When we interviewed pharmacists, they suggested that there were a lot of unanswered questions about whether the Medicaid program was being manipulated in some way.”
Reporting by the Dispatch team and other newspapers in Ohio caused state Medicaid officials to audit the two PBMs serving health plans covering Medicaid beneficiaries. At the time, CVS Caremark, a division of CVS Health, had four of those contracts. Since then, CVS Health has acquired Aetna, one of the nation’s largest health insurers. OptumRx, a division of UnitedHealth Group, had the other contract. UnitedHealth Group owns the nation’s largest health insurer, UnitedHealthcare.
In August 2018, Ohio’s audit showed that from April 1, 2017, through March 31, 2018, the PBMs had used spread pricing in their contracts and billed the state’s managed care plans $224 million more for prescription drugs than they paid to the state’s pharmacies to distribute those drugs. For generic drugs alone, the PBMs collected $208 million, or 31.4 percent of the $662.7 million managed care plans paid for generics.
In May 2019, the federal Centers for Medicare and Medicaid Services issued rules addressing spread pricing in Medicaid to prohibit PBMs from overcharging consumers.
To date, the Dispatch reporters have covered how PBMs affect veterans and military families, workers’ compensation cases, specialty drug spending and the average wholesale price of prescriptions in Ohio. The breadth and depth of the series make it a useful starting point for anyone covering PBMs in any state or for any purchaser, federal, state or private.
