Ohio Governor Orders Crackdown on PBMs

Ohio Governor Mike DeWine, frustrated with the behavior of pharmacy benefit managers (PBMs) and the fees they have extracted from Ohio taxpayers, has ordered a crackdown on PBMs, and ordered state agencies to prepare for a possible lawsuit against them. He has directed Ohio's Medicaid Director Maureen Corcoran to provide any pertinent data to Ohio Attorney General Dave Yost for a potential lawsuit against PBMs.

In remarks on Friday, February 1st, he said, "It's pretty simple. The PBM system we think has ripped us off...we require openness in regard to this whole PBM process. I think the thing the public should find very irritating and very alarming is the secrecy surrounding the PBM process."

Last year, when Mr. DeWine was Ohio's Attorney General, he launched an in-depth investigation into PBMs, and his successor Yost has picked up where he left off. In his own statement, Yost said that "We are actively looking into the PBM business practices and drug pricing. Litigation is never my first choice but justice is. If the state of Ohio claims are supported by evidence we have the tools and will work aggressively to recoup that money that is owed."

Ohio's Medicaid program covers three million people who are either living in poverty or disabled, and the program contracts with five managed care plans to oversee benefits. In turn, the plans hired two PBMs, CVS Caremark and Optum RX, to determine which prescription drugs are covered, to negotiate drug prices and rebates with drug manufacturers, and to set reimbursement rates to pharmacists who fill prescriptions.

But the results have been disappointing. Last fall, Medicaid commissioned a study and found that PBMs billed taxpayers $223.7 million more for prescription drugs than they reimbursed pharmacies to fill those prescriptions. This enabled CVS and Optum to earn $180 million in excessive profits. PBM fees were supposed to be about $0.90 to $1.90 per prescription, but instead CVS was billing the state around $5.60 per prescription, and Optum was charging $6.50 per prescription.

At a time when rising drug prices are harming consumers and putting strain on state budgets (since states are some of the biggest purchasers of prescription medicines), policymakers were appalled. Ohio quickly cancelled its contracts with the PBMs. The state also announced it would implement a more transparent pricing model where PBMs are paid a set fee per transaction and they must pay pharmacists the same amount they pay the state.

But Governor DeWine wants further action. While he declined to speculate about a possible lawsuit, he stated that "the policy is we are asking the attorney general if litigation can be filed. They have to tell us if that is possible."

Ohio's investigation of PBMs and their behavior should continue to the fullest possible extent. And if there is just cause, they should not hesitate to file a lawsuit and try to win back the money PBMs took.