- The state of Ohio is suing Centene for allegedly breaching its Medicaid contracts and using its pharmacy benefit managers to jack up prices for care, resulting in millions of dollars of overpayments by the Ohio Department of Medicaid, Attorney General Dave Yost said Thursday.
- The sealed lawsuit, filed Thursday in the Franklin County Court of Common Pleas, alleges that Centene subsidiary Buckeye Health Plan used an extensive network of subcontractors to provide pharmacy benefits, in order to misrepresent pharmacy costs and artificially inflate fees.
- Centene called the claims "unfounded" in a Thursday statement, and said it planned to aggressively defend the integrity of its pharmacy services in Ohio.
Roughly 2.9 million Ohioans are covered in the state's Medicaid program through five managed care organizations, including Centene's Buckeye Health Plan.
Buckeye hired Envolve and Health Net, two other Centene companies, to handle pharmacy benefits in 2018, even though Buckeye already used CVS Caremark as its PBM. That duplication was the main reason Buckeye charged the state more than twice the per-prescription costs of the other four MCOs in Ohio, a state consultant found, as reported by the Columbus Dispatch at the time.
The business practice raised eyebrows in the attorney general's office. Ohio investigated Buckeye and found significant breaches of contract, including filing for reimbursement that was already paid by third parties; not telling the state the true cost of pharmacy services; and artificially inflating dispensing fees, according to Yost.
"Corporate greed has led Centene and its wholly owned subsidiaries to fleece taxpayers out of millions. This conspiracy to obtain Medicaid payments through deceptive means stops now," Yost said in a statement.
The lawsuit was filed under seal due to a confidentiality and nondisclosure agreement between Ohio and Centene, the attorney general's office said.
Centene, however, denies the allegations in the lawsuit. "Envolve's pharmacy contracts with the State are reviewed and pre-approved by state agencies before they ever go into effect. Furthermore, these services saved millions of tax-payer dollars for Ohioans from market-based pharmaceutical pricing," the St. Louis-based insurer said.
PBMs say they're an important link in the pharmaceutical supply chain because they leverage their size to negotiate rebates or discounts on pricey medications with drug manufacturers.
However, middlemen have come under fire for raising prices through myriad shadowy business tactics, including spread pricing — a practice where they actually get more money from taxpayer-funded health plans by charging the plans one price for drugs, but reimbursing the pharmacies a different rate.
The Trump administration proposed a rule banning rebates under Medicare and Medicaid, but the 2019 effort slowly fizzled among fierce industry pushback and a legal challenge. In a surprise move, the rule, which would replace drug rebates in Medicare Part D with discounts paid directly to consumers, was finalized in November. The Biden administration, however, recently pushed back the start date of the rule by one year, to January 2023.
Rising costs in Medicaid was a huge problem for states even prior to the COVID-19 pandemic, as the safety net program is often the first or second budget line item. Things only went downhill amid the pandemic.
Ohio was among the states last year with plans to cut rates paid to private managed care providers. In May, the state cut $210 million from its Medicaid program, with the effects mostly borne by its MCOs — including Centene. The state's Medicaid department is also in the middle of awarding new managed care contracts, along with creating a single, state-supervised PBM.
Centene's core business is Medicaid managed care, covering 13.6 million Medicaid members nationwide. Its massive footprint in government-sponsored health plans is a net positive for the insurer amid rising demand for Affordable Care Act plans and safety-net insurance as millions of Americans lost jobs last year during the COVID-19 recession. Centene made $1.8 billion in profit last year.