Study finds millions in Medicaid unfairly pocketed by Pharmacy Benefit Managers

by | Feb 4, 2020


A new Florida study, released last week, found that major health care companies using pharmacy benefit managers (PBM’s) have positioned themselves to pocket millions of dollars from the state’s Medicaid system that were intended to lower costs for millions of low-income Floridians. The study found that despite processing less than half of one percent of all pharmacy claims, specialty pharmacies affiliated with PBM’s managed to collect 28 percent of the available profit margin from dispensing prescription drugs.

The study was commissioned by the Florida Pharmacy Association and American Pharmacy Cooperative Inc. using data obtained from Florida’s Agency for Health Care Administration (AHCA) by the Small Business Pharmacies Aligned for Reform.  Smaller pharmacy operators say the report proves that larger, vertically integrated companies that use PBM’s are using “predatory” business practices that short-circuit the free market.

State lawmakers expressed alarm at the news and underscored the need for greater transparency and oversight when it comes to PBMs’ role in Florida, particularly regarding situations where PBM’s and managed care companies own the pharmacies where they direct patients.

“Markets fail when markets get corrupted and that is what has happened here. When the middleman is allowed to own the end-retailer then the middlemen’s incentive to manage cost appropriately for the benefit of the chain is broken,” said State Representative Randy Fine at a press conference to discuss the study.

According to the study, vertically integrated health care companies – that is, companies where the health insurance company and PBM also control their own pharmacies – have a significant advantage in prescription drug pricing and reimbursement rates over smaller pharmacy operations that only focus on dispensing prescription drugs. These large and powerful organizations then use their leverage and contracts with the state to squeeze dollars from their competitors by requiring patients to go to pharmacies where they have a financial interest. This process frequently involves rewarding their own pharmacy operations with significantly higher reimbursement rates from Medicaid, according to the study.

The study provided an example of this situation where Sunshine Health directed 95 percent of all claims for generic cancer drug Gleevac to Acaria, its wholly owned specialty pharmacy. It reimbursed this speciality pharmacy an average of $4,399 above the national average cost for the drug.

“We have a responsibility to assure that there is no manipulation of prices or anti-competitive practices by PBMs and other entities that result in increased costs to patients and push our local pharmacies out of business,” said State Senator Gayle Harrell.

Small pharmacy operations describe PBMs as shadowy prescription drug middlemen whose practices are driving neighborhood pharmacies out of business while reducing access to care for many Floridians.

The State of Florida contracts with PBMs to manage Florida’s Medicaid program in order to negotiate lower drug prices. But the new study concludes that PBMs have actually cost the public millions of dollars by forcing patients to use PBM-affiliated pharmacies and then charging higher prescription costs.

According to Medicaid data contained in the study, one pharmacy in North Miami was responsible for 25% of all managed care claims in Florida for a particular dermatological cream in 2018, receiving a total profit margin of over $1.8 million.

The independent study by 3 Axis Advisors reviewed more than 359 million prescription drug claims within Florida’s Medicaid program between 2012 and 2019. The information from AHCA was coupled with data from more than 100 pharmacies to determine the impact PBMs have on the portion of the health care system paid by Florida taxpayers through the Medicaid program.

But an Washington D.C. industry group representing PBM’s expressed skepticism of the study.

“The report has extensive methodological weaknesses, faulty assumptions, and politically motivated editorial comments not supported by data or facts. The group behind the report is founded and operated by special interests – independent pharmacy lobbyists – that are seeking higher profits on the backs of patients, who would pay more for prescription drugs,” said Greg Lopes, a spokesman for the Pharmaceutical Care Management Association. “In fact, there are over 32% more independent pharmacies open today in Florida than 10 years ago. In Florida, PBMs will save consumers and health care programs more than $43 billion over 10 years, and have helped the state Medicaid program save $2.3 billion.”

The firm behind the study has previously evaluated the structure of PBMs in New York, Illinois, Michigan, and Ohio. Their research has helped uncover hundreds of millions of dollars in hidden PBM charges in state Medicaid programs.

“Our team has analyzed drug pricing data in numerous other states, but this study is more exhaustive and comprehensive than any we’ve ever produced. The sheer volume of claims analyzed provides an unprecedented view behind the shadowy curtain of pricing in the prescription drug supply chain,” said Antonio Ciaccia, co-founder of 3 Axis Advisors. “The implications outlined in this study show some extremely concerning trends that highlight the warped incentives, pricing distortions, and conflicts of interest currently embedded in state Medicaid programs. While this analysis is focused on the Florida managed care and PBM experience, this report is an alarm bell for state and federal officials across the country that reveals there’s much more to prescription drug costs than meets the eye.”

1 Comment

  1. Julie Baak

    Come on down to the show me state of Missouri and see how our patients, employers, physicians and pharmacists are being screwed by UHC and OptumRX

 

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