State regulators ordered health insurers and their pharmacy benefits managers Wednesday to cease enforcement of gag orders preventing pharmacists from informing consumers of the lowest drug price available.
In addition, the Ohio Department of Insurance prohibited charging consumers more for their prescription medication than it would cost if they paid without insurance, or out of pocket.
"Needlessly charging Ohioans more for their prescriptions by keeping them in the dark is not defensible," said Ohio Department of Insurance Director Jillian Froment.
An agency spokesman added, "We believe we can prohibit deceptive practices."
CVS Caremark, pharmacy benefit manager for four of Ohio’s five Medicaid managed-care plans, has said that such clauses do not exist in their agreements with local pharmacists.
"CVS Caremark does not prevent pharmacies in our network from talking to their patients about the availability of a lower drug price for cash-paying patients," said David Palombi, senior vice president for CVS Health. "In fact, our contracts with pharmacies stipulate that the patient should always get the benefit of the lower price between the pharmacy’s cash price and the plan’s co-pay."
A number of central Ohio pharmacists insist otherwise.
A 2018 CVS Provider Manual obtained by The Dispatch supports the pharmacists' statements. The 346-page document — labeled "confidential and proprietary" and exempt from Freedom of Information Act disclosure — bans disclosure of "confidential Caremark information" including "business practices ... trade secrets ... maximum allowable (drug) cost lists ... reimbursement rates and terms."
If anyone breaches the agreement, "Caremark will be entitled to specific performance, including immediate issuance of a temporary restraining order or preliminary injunction enforcing the agreement, and judgment for damages (including reasonable attorneys’ fees and costs) caused by the breach."
The state's order comes after The Dispatch reported independent pharmacists' contention that CVS Caremark is overcharging taxpayers and driving out retail competition by paying lower rates to pharmacists who fill prescriptions for Medicaid patients — sometimes less than the drug cost — and keeping the savings.
CVS has said repeatedly that the independent pharmacists are incorrect.
"This compensation model is often demanded by our clients, including the managed Medicaid plans we support in Ohio, because it provides them with stability and certainty around their drug costs," Palombi said. "Ultimately, under this model, we make money on some drugs and lose money on others. Overall, CVS Caremark’s operating profit is about 3.5%, far lower than the manufacturers of expensive drugs who you should be holding accountable for the rising price of drugs."
Max Peoples, who owns Uptown Pharmacy in Westerville and another drugstore in Marengo, has said he has gotten around the ban by advising consumers, whether they are covered by Medicaid or other insurers, to always ask for the "cash price."
Medicaid, the federal-state health program covering more than 3 million poor and disabled Ohioans, spent $3.2 billion on prescription drugs last year.
Under increasing pressure from state lawmakers to address the concerns, Medicaid officials recently announced that they would require the managed care companies they hire to start reporting pharmacy reimbursement rates to get a clearer picture of where the money is going. Currently, the state is not entitled to view Medicaid rates paid to pharmacists.
Lawmakers also are preparing a bill to give the Ohio auditor the authority to review pharmacy benefit manager contracts.
"Consumers have a right to better understand the cost of their prescription drugs and whether or not they can get those prescriptions filled at a lower cost," Froment said. "We require insurers and pharmacy benefit managers to act in good faith and to follow Ohio law, but these explicit prohibitions will make expectations clear and will protect Ohio consumers."
With the gag orders removed, Froment noted, pharmacists will be free to discuss more affordable options with consumers. For example, if a consumer has a $20 co-pay for a prescription that would cost $10 without insurance, they must be charged the lower cost.
Third-party administrators, including managed care companies and pharmacy benefit managers, are licensed by the Department of Insurance, and those who engage in "fraudulent, coercive or dishonest practices" can have their license suspended.