Medicaid contractor sued for overbilling settles with Ohio AG for $88 million

The lawsuit spurred a similar accusation in Mississippi.

The largest Medicaid contractor in the U.S. settled with Ohio for $88.3 million, following accusations that it set up “an opaque and multi-layered billing process” to keep a larger cut of the state’s money than it should have when paying for pharmacy benefits.

The insurance giant didn’t admit to doing anything wrong. The Ohio lawsuit was closely followed by a similar lawsuit by Mississippi, which settled also Monday for $55 million, and Centene has a set aside $1.1 billion related to talks with other plaintiffs.

ExplorePREVIOUSLY: Ohio AG recommends pharmacy benefit overhaul

“I hope that a message is going out to the entire industry across the country, that the days of operating behind the curtain as the Great Oz are over, and that you’re working for the people of the states that hire you to bring value and quality, and to do it with integrity,” said Ohio Attorney General David Yost. “I’m hoping that we don’t have any more lawsuits. But we’re willing to bring them if it’s necessary.”

The contractor Buckeye Health Plan, subsidiary of Centene, manages pharmacy benefits and pays claims to pharmacists on behalf of about 435,000 Ohioans with Medicaid. That includes about 18,000 people in Montgomery County.

For years, Ohio officials have been untangling how much of a cut has been going to contractors who manage $3 billion (and growing each year) in pharmacy claims for Ohio Medicaid.

Attorney General Dave Yost in March filed suit in Franklin County Common Pleas alleging the pharmacy benefit manager overbilled the Ohio Department of Medicaid for pharmacy services it provided and conspired to misrepresent the costs of pharmacy services, including the price of prescription drugs.

Most Medicaid managed care companies pay for pharmacy claims through a pharmacy benefit manager that subcontracts with the company.

ExplorePREVIOUSLY Ohio AG sues pharmacy middleman, alleges overcharges

When Centene’s Buckeye Health Plan first got its contract to manage benefits for Ohio Medicaid, it hired sister company Envolve to work as a subcontractor and pay out pharmacy claims.

Then in spring 2016, Centene bought an insurance company called Health Net. Health Net’s pharmacy benefit manager CVS Caremark paid lower prices on pharmacy claims because the bigger contractor had negotiated better deals on drug prices.

According to Yost’s complaint, Centene and Envolve leaders realized they could have CVS Caremark pay out Buckeye’s pharmacy claims for lower prices, and then hide those savings from Ohio Medicaid.

Yost said this created “an opaque and multi-layered billing process.” Buckeye payed Envolve much more than it paid CVS Caremark, according to Yost’s complaint.

For example, in one week in 2018, Yost’s office said CVS Caremark billed Envolve a little under $7 million. That money was to reimburse how much CVS Caremark paid pharmacists. Then Envolve turned around and billed Buckeye Health Plan for around $7.39 million, or a markup of $399,536 in one week.

These cost savings week after week were not disclosed to Ohio Medicaid, according to Yost’s team, and instead “Centene, Buckeye, and Envolve secretly retained these monies for themselves to pad Centene’s profits at the expense of taxpayers of Ohio.”

The scrutiny that Ohio lawmakers have paid in recent years to pharmacy benefit spending has laid groundwork for legislation and lawsuits in other states. On Monday, Centene in its settlement with Mississippi for $55 million, also admitting no liability and also over similar accusations related excess pharmacy spending.

“These agreements reflect the significance we place on addressing their concerns and our ongoing commitment to making the delivery of healthcare local, simple and transparent,” said Brent Layton, Centene’s president of Health Plans, Markets and Products, who added that it is important to put these issues behind them.

Centene also said in a statement that it is talking with other plaintiffs “in an effort to bring final resolution to these concerns in other affected states” and has set another $1.1 billion in reserves related to those talks.

ExploreOhio’s overhauling $20B Medicaid program, but budget could pump the brakes

Centene in 2019 restructured its pharmacy benefit operations “to create a more transparent relationship between its health plans and its pharmacy benefits manager.” Going forward, subsidiary Envolve will be administrative service provider, not a pharmacy benefit manager.

The DeWine administration is embarking on a broader reform of pharmacy benefits through its overhaul of the Ohio Medicaid system. The new system is expected to go into effect in early 2022, though there’s a pending proposal in the legislature to halt and restart the process.

Buckeye Health’s bid to be a contractor with the new Medicaid system was put in limbo in the wake of the lawsuit and a final decision still hasn’t been made.

The Story So Far: Ohio Pharmacy Benefit Managers

Previously: Ohio Attorney General Yost and outside counsel filed a lawsuit against Centene in March. The lawsuit also put Centene’s bid to keep working with Ohio Medicaid in limbo.

What’s new: Ohio has settled with Centene for $88.3 million -- one payment within 45 days and one payment within a year of the settlement. Half of the cash goes back to the federal Medicaid program.

What’s next: Ohio Medicaid will decide whether to contract with Centene subsidiary Buckeye. Separately, Centene is also talking with other plaintiffs.