A pharmacy manager retrieves a a medication. (Photo by Joe Raedle/Getty Images)
In what could be a harbinger of more settlements, Medicaid managed-care contractor Centene on Monday settled potential fraud claims by Ohio and Mississippi for $88.3 million and $55 million, respectively.
Ohio is the only state to file suit so far alleging improper double billing through Centene’s pharmacy middlemen. But Mississippi, Kansas, Arkansas, Georgia, Oklahoma and New Mexico are also reported to be considering such litigation. Centene operates in Iowa under the name Iowa Total Care as one of the managed care organizations under the state’s Medicaid program.
In a filing Monday with the U.S. Securities and Exchange Commission, St. Louis-based Centene announced the settlements with Mississippi and Ohio. And it said it had money set aside to settle with other states.
“Additionally, the company announced it is in discussions with a plaintiff’s group led by the law firms of Liston & Deas and Cohen & Milstein in an effort to bring final resolution to these concerns in other affected states,” the filing said. “Consistent with those discussions, Centene has recorded a reserve estimate of $1.1 billion related to this issue, exclusive of the above settlements.”
In announcing the Ohio settlement, Attorney General Dave Yost said that Centene, the largest Medicaid managed-care contractor in the United States, didn’t admit wrongdoing. But he said the amount of the settlement speaks for itself.
“I will accept an apology note that has this many zeros behind it,” he said.
Ohio has been a leader in trying to police middlemen known as pharmacy benefit managers. And Yost said one of the terms of the settlement is that if any other state gets more than $88 million, Ohio will as well.
In a press release, Centene said “the practices described in the settlement focus on the structure and processes of Envolve (a subsidiary), primarily during 2017 and 2018.”
As a managed-care provider, Centene uses state Medicaid money to sign up clients and to manage and pay networks of providers such as doctors to care for them.
To handle the complexity and volume of drug transactions, manage-care providers hire pharmacy benefit managers. They negotiate discounts from manufacturers, create lists of preferred drugs and determine reimbursements to pharmacies.
The PBM industry is highly concentrated and critics say the biggest players use a lack of transparency to gouge payers. Prompted by an investigation by The Columbus Dispatch, the Ohio Department of Medicaid in 2018 analyzed all reimbursement data from the prior year. It found that in 2017 alone, CVS Caremark and OptumRx billed the state almost a quarter billion dollars more for generic drugs than it reimbursed the pharmacies that had bought and dispensed them.
Reporting by The Dispatch also showed that a Centene-owned PBM was paid $20 million that year for work that its subcontractor, CVS Caremark, said it did. Both companies later denied that it was a case of double-dipping.
The lawsuit Yost filed against Centene in March accused the company of several kinds of double billing.
It said Centene hired its own PBM, Envolve, which hired another Centene-owned PBM, Health Net Pharmacy Solutions, which hired CVS Caremark, the biggest PBM in the country. Working through that chain of middlemen, the lawsuit said, Centene pocketed $6.7 million a year that was intended to cover pharmacists’ dispensing costs.
The suit also accused Centene’s PBMs of wildly marking up drug prices. During a single week in 2018, that amounted to $400,000, the suit said.
Centene said that starting in 2019, it introduced new rules.
“Going forward, Envolve will operate as an administrative service provider, not a PBM, on behalf of Centene’s local health plans to further simplify our pharmacy operations,” the statement it released on Monday said.
The company also seemed anxious to reassure states it depends on for billions of dollars worth of business every year.
“We respect the deep and critically important relationships we have with our state partners,” Brent Layton, the company’s president of health plans, markets and products, said in a statement. “These agreements reflect the significance we place on addressing their concerns and our ongoing commitment to making the delivery of healthcare local, simple and transparent. Importantly, putting these issues behind us allows us to continue our relentless focus on delivering high-quality outcomes to our members.”
Because of the suit, Centene’s managed care organization, Buckeye Health Plan, was suspended from its business with the Ohio Medicaid department, which has an annual budget of $29 billion. Yost said it’s up to the Medicaid department to decide whether Centene will be reinstated.
Pharmacists across the country have for years complained of predatory reimbursement practices by huge pharmacy middlemen. They greeted the news of Monday’s settlement.
“This is just the latest evidence that PBMs have been using their self-infused complexity in prescription-drug pricing to fleece providers and payers for billions,” Scott Knoer, executive vice president and CEO of the American Pharmacists Association, said in a text message. Ohio “Gov. Mike DeWine and Attorney General Dave Yost have been national leaders in bringing needed accountability to the shady PBM industry. I’m glad the taxpayers in my home state are finally getting some of their money back.”
Since Medicaid is funded both by state and federal governments the settlement money will be split among those entities, Yost said. Similar arrangements are likely to be made in other states Centene settles with.
It typically does business as a Medicaid managed-care provider with a local-sounding name. In addition to Ohio’s Buckeye Health Plan, in Mississippi it owns Magnolia Health Plan, in Georgia it has Peach State Health Plan, in Kansas it’s Sunflower Health Plan, in Arkansas, Arkansas Total Care, while in Oklahoma the company owns Oklahoma Complete Health, and in New Mexico it owns Western Sky Community Care.
Yost said hoped that Monday’s settlement catches the attention of all big Medicaid contractors.
“I hope that the message is going out to the entire industry across the country that the days of operating behind the curtain as the great Oz are over and that you’re working for the people of these states that hire you to bring value and quality and to do it with integrity.” he said.
Ohio Capital Journal is part of States Newsroom, a network of news outlets supported by grants and a coalition of donors as a 501c(3) public charity. Ohio Capital Journal maintains editorial independence. Contact Editor David DeWitt for questions: [email protected] Follow Ohio Capital Journal on Facebook and Twitter.
Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.