Express Scripts faces lawsuit alleging it overcharged Ohio public pension fund

Dive Brief:

  • Ohio Attorney General Dave Yost is going after another pharmacy benefit manager in court. This time, Yost is alleging Express Scripts overcharged the Ohio Highway Patrol Retirement System, a public pension fund, and “pocketed millions.” Express Scripts, now owned by Cigna, declined to comment.
  • The lawsuit alleges multiple contract breaches by Express Scripts including the failure to honor pricing discounts and dispensing fee guarantees, classifying generic drugs as brand name to charge higher rates and overcharging for generic drugs.
  • Yost said Express Scripts “egregiously charged for services it didn’t deliver,” that has cost Ohioans millions, “and we want our money back,” according to a statement released Monday.

Dive Insight:

Ohio has been cracking down on PBM practices, which led the state to ending the practice of spread pricing, a tactic that has become increasingly controversial. State lawmakers also mandated that the state move to one single PBM as an attempt to better safeguard state dollars, but it has yet to happen.

The lawsuit is another step in pushing for more PBM transparency in Ohio.

“It’s no secret that PBMs have been keeping secret their prescription pricing in order to evade public scrutiny and rake in revenue,” Yost said in a statement.

A June 2018 commissioned audit shocked many when auditors found that the PBMs managing Ohio’s Medicaid prescriptions, including CVS Caremark and Optum, charged the state nearly 9% more than what they paid pharmacies for the actual drug. The audit urged the state to switch to a different pricing model, or what’s known as a “pass-through” pricing option and to get rid of spread pricing. The state listened and ended the contracts and instituted new terms that did not include spread pricing.

Yost, then state auditor, conducted his own audit of the program, which revealed similar findings. He found the overall average spread price was $5.71. That increases the ability for PBMs to make a significant profit when they’re processing millions of prescriptions and keeping a portion of the amount paid by the health plan instead of passing it along to the pharmacies.

In the report, Yost highlighted a potential conflict of interest as CVS pharmacies were paid more for specialty medications compared to independent pharmacies. However, Yost urged readers to use caution before drawing conclusions as so much is unknown about PBM operations.

Yost pointed out that there are a number of other factors that influence PBM revenues and pharmacy reimbursements, pointing to rebates and fees.”The Ohio Legislature should take steps to mandate the reporting of additional statistical and financial data that would provide a more complete understanding,” the report said.

In fact, the U.S. Supreme Court is set to hear a case on whether states can regulate certain aspects of a PBMs’ business, including spread pricing.

The practice is also the target of federal regulators. CMS last year proposed to limit spread pricing on a plan’s medical loss ratio. Essentially, CMS wants Medicaid managed care plans to exclude any excess money retained by a PBM using spread pricing from the actual cost of claims used to calculate a plan’s medical loss ratio.

The rule was designed to force PBMs to disclose spread pricing to managed care plans, ensuring better accounting of spread pricing and accurate reporting of a plan’s medical loss ratio. The rule is still under review.

This isn’t the first time Yost has taken on a giant PBM as attorney general. The first lawsuit was filed last year alleging UnitedHealth Group’s PBM OptumRx overcharged the Bureau of Workers’ Compensation by $16 million. The case is waiting on rulings from a judge on several motions, Yost’s office said in a statement.

Posted in Law