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Ohio Medicaid to change the way it pays for prescription drugs

Sources: The Columbus Dispatch and Health Policy Institute of Ohio

On August 14, the Ohio Department of Medicaid announced that it will move away from the use of “spread pricing” by pharmacy benefit managers (PBMs) thus changing the way prescription drugs are paid for through Medicaid; the state’s five managed care plans were directed to terminate contracts with PBMs using spread pricing and move to a more transparent pass-through pricing model effective Tuesday, January 1, 2019.

According to The Columbus Dispatch, PBMs have profited immensely by billing taxpayers far more than they reimburse pharmacists for filling prescriptions for Medicaid patients – the difference is referred to in the industry as “spread pricing.” Under a pass-through model, pharmacy middlemen would be paid a straight administration fee and be forced to bill the state the same amount they pay pharmacists.

The termination of spread pricing contracts by Medicaid is a dramatic shift in position. Less than two months ago, Medicaid told state lawmakers that that Medicaid had concluded there wasn’t necessarily justification for a crisis and immediate regulatory intervention.

On August 16, State Auditor Dave Yost released the results of a separate investigation that concluded that the state should hold off on changes to PBM contracts (Source: “Ohio Medicaid Drug Audit Calls for Transparency, Highlights Pharmacy Closures,” The Columbus Dispatch, August 16, 2018).

“I’m not sure that the remaining cost controls in the long term will be effective and that’s why I’m calling for today a freeze for a few months and a robust analysis,” Yost told the Joint Committee on Medicaid Oversight. “We would be foolish indeed to discard the current system, which is providing some measure of cost control, for greater transparency — but significantly higher costs.”

Medicaid spent more than $3 billion on prescription drugs last year.

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