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On Oct. 1, pharmacists across Pennsylvania began receiving less money in reimbursement for certain drugs they dispensed to Medicaid patients. In some cases, they would even lose money compared to the cost of stocking the drugs.
The amounts were different across pharmacies, and often small but significant.
“Two percent on an HIV med that’s $5,000 is a lot of money,” said Rob Frankil, the executive director of the Philadelphia Association of Retail Druggists. “All of a sudden you went from making $20 to losing $80.” Frankil noted not all pharmacies were affected.
The change was the result of a convoluted maneuver involving some of the largest providers of health care services for Pennsylvanians on Medicaid, the managed care organizations — companies or plans hired by the state to put together networks of health care providers and cut health care costs when possible — Amerihealth Caritas and Keystone First and the pharmacy benefit manager PerformRX.
Pharmacists and the state Department of Human Services say the change should never have been allowed because of the terms of their state contracts.
A spokesperson for the Department of Human Services said their agreement with Amerihealth Caritas and Keystone First required the agency’s approval for any change in pharmacy reimbursement rates. The agency “did not approve a change to Amerihealth Caritas/Keystone First’s rates.”
The DHS spokesperson added, “We’ve issued a corrective action plan” which would require the insurance companies to revert to their older reimbursement rates and reimburse pharmacies for anything lost since Oct. 1.
A spokesperson for Amerihealth Caritas said that the company notified DHS prior to the rate change, which it believed satisfied its contractual requirements.
“We are working with DHS, our partner in caring for millions of Pennsylvanians over the past 40 years, to get additional clarity and chart the best path forward,” the spokesperson added.
According to Frankil, pharmacists have not seen any money back or a change in reimbursement rates.
In the past year, pharmacy trade groups say more than 140 pharmacies have closed in Pennsylvania. They have largely pinned the blame on untenable pharmaceutical reimbursement rates.
A contract for a contract
To put what happened in simple terms: when a Medicaid patient picks up a drug at a pharmacy, they may pay a copay or nothing at all. The rest of the cost of the drug is covered by their insurance, which hires a middleman called a pharmacy benefit manager to reimburse the pharmacy.
Pharmacies have dozens of different contracts with pharmacy benefit managers. For every insurance plan they accept, they likely have a contract with a pharmacy benefit manager hired by that insurance company..
Pharmacists say they are often at the whim of these pharmaceutical middlemen when it comes to the terms of their contracts. “Take-it-or-leave-it” is a term often used by pharmacists to describe them. But when dealing with Medicaid, there are supposed to be certain guardrails. For example, insurance companies that offer Medicaid plans are supposed to seek approval from the state if anything will result in changes to how pharmacies are reimbursed for their patients’ drugs.
None of the changes will affect the costs of drugs for Medicaid patients.
Prescription for trouble: Pennsylvania pharmacists say PBMs are driving pharmacy closures
The Department of Human Services told the Capital-Star that, though the agency was notified, it did not approve the Oct. 1 Keystone First and Amerihealth Caritas rate change. Those two companies collectively insure about 35% of the state’s Medicaid enrollees, according to the latest enrollment report. They also use the same pharmacy benefit manager, PerformRX. All three companies are connected through the same parent company, BMH LLC.
According to a spokesperson for AmeriHealth, PerformRX didn’t change the terms of its contracts with pharmacies, per se. Instead it paid a different pharmacy benefit manager, OptumRX, to “lease the OptumRx retail pharmacy network.”
What does that mean? Remember that pharmacies have many contracts with many pharmacy benefit managers. And, basically, PerformRX thought that OptumRX had a better contract, in many cases paying pharmacists less for the same drugs. So PerformRX made a deal to effectively take over OptumRX’s contracts and pay pharmacists that lower reimbursement rate.
Amerihealth Caritas’ statement offers more jargon than clarity. “This transition allows us to leverage OptumRx’s pharmacy contract terms and offer competitive rates and cost-savings while ensuring convenient, accessible, high-quality care for members,” AmeriHealth Caritas said in a statement to the Pennsylvania Capital-Star.
Frankil, a former board member on the state board of pharmacy and the head of a pharmacist trade group, said he’d never heard of the practice of network leasing.
“It shouldn’t work that way,” he said. “It just doesn’t work that way and it is, in my opinion, very very wrong.”
In August, Auditor General Tim DeFoor released a scathing report arguing that the Department of Human Services had failed to oversee pharmacy benefit managers and monitor its contracts with Medicaid managed care organizations.
Pharmacy benefit managers have also been a target of Gov. Josh Shapiro, who championed a bipartisan bill aimed at reining them in.
The auditor general’s report alleged that the Department of Human Services told DeFoor that it had little authority when it came to curbing the middlemen, something his office disagreed with. Though, in this case, the Department of Human Services says that its issue is with the managed care organizations who agreed not to take actions that would result in reimbursement rate changes for pharmacies.
Federal regulators have been investigating pharmacy benefit managers as well, and some lawmakers are calling on them to expand their probe.