Sep 22, 2018 at 4:30 AM

As Ohio Medicaid officials promise complete transparency in new contracts that will take effect next year between managed-care plans and prescription-drug middlemen, pardon our healthy skepticism.

The recent history of taxpayers being soaked and consumers short-changed by pharmacy benefit managers, along with the sheer complexity of the system, make a truly fair deal seem less than certain.

Medicaid officials are confident: “Ohio is being looked at as a model,” spokesman Tom Betti said. “We have been getting calls from lots of other states, lots of national attention on how we solve this issue.”

The issue he refers to is how to ensure that pharmacy benefit managers do what they’re supposed to do — make prescription-drug benefits cheaper and more efficient and effective — without skimming off excessive profits.

The problem, as outlined by Dispatch reporters in the past year, has been secrecy and complexity: The state contracts with five managed-care plans to act as insurance companies for most of Ohio’s Medicaid patients. Each of those private companies, in turn, contracts with a pharmacy benefit manager to handle the prescription-drug benefit. The secrecy comes in the contracts between the managed-care plans and the PBMs.

To date, it seems no rules restrained how the contracts were structured. Only because independent pharmacists complained have we learned that PBMs had great latitude to decide how much to pay pharmacies for drugs dispensed to Medicaid patients.

In some cases, PBMs used their bulk purchasing power to negotiate low prices for drugs from the manufacturer but still charged the managed-care plans (i.e. taxpayers) a high price. In addition, they sometimes low-balled the reimbursements to pharmacies, so that small independent pharmacies actually lost money on certain prescriptions to Medicaid patients.

No one could easily track just how much money PBMs were taking out of the prescription-drug system because their contracts and drug-price lists have been secret — a “black box,” in critics’ terms.


PBMs also will be required to disclose any other revenues, such as fees pharmacies pay to be part of a managed-care plan’s network and rebates from drug manufacturers.

That undoubtedly is a big improvement over the “black box,” but a pharmacy expert warns state officials to be vigilant for workarounds through which PBMs might hide revenue. For example, they could change the drug formularies — the list of which drugs plans should cover — to boost the most profitable ones.

They also could employ flexible definitions of terms, such as “rebate,” to technically comply with the state’s requirements but evade true transparency.

All the complexity raises the question of whether the PBM model — creating a drug middleman with its own profit imperative — is the best way to manage a prescription-drug benefit.

Ohio has opted to stick with the model. We hope the new safeguards are enough to protect taxpayers and Medicaid recipients, but we urge state officials to keep an extremely close eye on the system, and we will do the same.