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Ohio Medicaid Breaks Contract With Pharmacy Middlemen Over 'Spread Pricing'

Ohio Medicaid is ending contracts for Pharmacy Benefits Managers after the state found it likely overpaid for the prescription drugs.

Ohio Medicaid is telling its five managed care plans to sever their contracts with two pharmacy benefits managers and to work up new deals by the beginning of the year. It’s a sudden change for the agency.

In a letter to the managed care plans, Ohio Medicaid Director Barbara Sears said they must stop working with CVS Caremark and Optum, which are using a “spread pricing” model.

Sears said the managed care plans have until January 1 to work out deals with PBMs that will agree to a pass-through model, where the plans pay the PBMs’ fees. Sears said that model will be more transparent and won’t cost taxpayers extra money.

A report commissioned by Ohio Medicaid showed the spread between what the state paid the PBMs and what they paid pharmacies added up to $224 million last year, which the state initially declined to say was a good or bad deal.

A court battle continues over the release of that report, which the PBMs say contains trade secrets.