Ohio's Department of Medicaid immediately cancelled the contracts it has with two pharmacy benefit managers — CVS Caremark and Optum Rx — over pricing practices that cost the state tens of millions of dollars, according to the Dayton Daily News.
The pricing practice in question is called "spread pricing," where the PBM bills CMS or the state Medicaid program more for prescription drugs than it paid to retail pharmacies, keeping the remaining difference or "spread, " The Cincinnati Enquirer reports.
Ohio Medicaid Director Barbara Sears told the state's five managed care plans to terminate the contracts immediately to begin working on new ones. Ms. Sears said the managed care plans have until Jan. 1 to move to a more transparent pass-through pricing model with CVS Caremark and Optum.
Under the new model, PBMs would receive administrative fees from the managed care plans and must bill the state Medicaid program the same amount they pay pharmacists, according to the Enquirer.
The unexpected move to end these contracts comes after Ohio released a report in July disclosing Optum and CVS charged 8.8 percent more than they paid pharmacies to fill prescriptions. This rate discrepancy allowed the PBMs to pocket more than $224 million.
A court battle continues over the release of that report, which PBMs claim contain trade secrets.