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States Probe Business Practices of Pharmacy Benefit Managers

Ohio, Oklahoma, Georgia and New Mexico are among those scrutinizing PBMs

The Wall Street Journal

Several states are investigating pharmacy benefit managers, with some saying they are focused on whether the companies fully disclosed details about their business and potentially received overpayments under state contracts, according to state officials and documents.

States including Ohio, Oklahoma, Georgia, New Mexico, Kansas, Arkansas and Mississippi, as well as the District of Columbia, are scrutinizing PBMs, according to the offices of state attorneys general and auditors, as well as public documents including state contracts and securities filings.

Details about the investigations’ focus are typically not public. Officials with some states said they were looking at companies in their Medicaid programs and state-employee plans. Among the companies under scrutiny are units of Centene Corp. , UnitedHealth Group Inc. and CVS Health Corp.

“I’m aware of many states that are looking at this,” said Ohio Attorney General Dave Yost, a Republican, whose office recently sued Centene, alleging it had misled the state’s Medicaid program about its pharmacy-related costs, resulting in overpayments by the state. States are at various stages of examining PBMs, he said, but he expects a couple of new suits to be filed this summer, and “before this is all done, I will be surprised if we don’t have a dozen or more states” bringing complaints against PBMs.

A Centene spokeswoman said it “provides pharmacy benefit programs for Medicaid and Medicare according to the regulations, laws and contractual guidelines issued by state agencies.” The Ohio suit’s claims are “unfounded and will be vigorously defended in court,” she said.

CVS Chief Policy Officer and General Counsel Tom Moriarty said that the company works with state attorneys general “to demonstrate how PBM solutions deliver drug cost savings to clients, including significant savings to state budgets.” He said CVS faced a limited number of state investigations, with some dating back to early 2017.

Pharmacy benefit managers typically work for employers and health plans, managing drug benefits and negotiating pricing with pharmaceutical companies and drugstores. They often have many lines of business that involve state governments, including handling the drug benefits of state employees and working with managed-care companies that administer Medicaid benefits.

At many large companies, including UnitedHealth, Centene, Cigna Corp. and CVS, the same parent owns both a PBM and a managed-care operation.

Mr. Yost said his office is continuing its investigation of PBMs. In addition to Centene, the Ohio Medicaid program uses UnitedHealth, among others. In March, the state filed its suit against Centene, which is seeking millions of dollars in damages.

Earlier, the state sued Cigna’s Express Scripts, alleging it had overcharged the Ohio Highway Patrol Retirement System, and UnitedHealth’s OptumRx, alleging it had overcharged the Ohio Bureau of Workers’ Compensation.

An OptumRx spokesman said the company believes the “allegations are without merit.” He declined to comment on state investigations. A Cigna spokeswoman declined to comment.

In its most recent quarterly filing with the Securities and Exchange Commission, Centene noted the Ohio suit and said that “other states are reviewing the practices of PBM service providers, including us, and could bring claims against us.” A recent SEC filing by CVS said the company was being investigated by the “attorneys general of several states, as well as the District of Columbia regarding its PBM practices, including pricing and rebates.”


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