More State Actions Are Likely Coming Against PBMs

In January, Ohio Attorney General Dave Yost announced an investigation of PBMs that contract with Ohio's state agencies to manage drug benefits. In March, he filed a lawsuit against the PBM OptumRx for overcharging the state government for generic drugs, seeking $16 million in damages. Now, court filings suggest that more legal actions against PBMs are on the way.

Court exhibits filed on March 15th in Franklin County Common Pleas Court are the first evidence. According to these filings, former Ohio Attorney General and current Ohio Governor Mike DeWine engaged a law firm to investigate and possibly sue the PBMs managing drug benefits for Ohio's pension funds and its Department of Administrative Services. He also directed the lawyers to look at the $2.5 billion that PBMs process each year on behalf of Ohio's Department of Medicaid through contracts with managed care groups.

The attorney, W. Lawrence Deas of Jackson, Mississsippi, is also investigating PBM deals with the Ohio Public Employees Retirement System, School Teachers Retirement System, School Employees Retirement System, Ohio Police and Fire Pension Fund and Ohio Highway Patrol Retirement System. He has also been retained by Ohio to investigate and handle the case against OptumRx for overcharging Ohio's Bureau of Workers' Compensation.

Last year, the Columbus Dispatch acquired data showing that PBMs in Ohio were charging Ohio taxpayers 12% more for drugs than they were reimbursing the pharmacies. Ohio Medicaid investigated the problem and found that PBMs were charging 8.8% more (slightly different number), but that results in PBMs getting an additional $224 million per year from taxpayers. As a result, Ohio directed its managed care plans to end their contracts with PBMs.

Other states are probing PBM practices and profits. Arkansas, Kentucky, and New York are all conducting investigations, and there is a lot of uncover. PBMs are not meaningfully regulated by state governments or by federal governments. Some states require PBMs to register and impose certain requirements, but there is little or no meaningful transparency. At the federal level, the most important PBM law passed in years was the ban on gag clauses enacted in the fall of 2018. It is an excellent beginning, but just a beginning.

Thankfully, things are changing. Next week, on Tuesday, April 9th, the Senate Finance Committee is holding a hearing on PBMs and how they contribute to higher drug prices. We hope that Senators ask good questions during this hearing and also that Ohio and other states investigate and bring actions against PBMs if needed. The American people deserve nothing less.