(The Center Square) – Louisiana might need to spend $90 million more to continue paying pharmacy claims in its state health plan through the end of the year, according to the agency that manages it.
The Louisiana Office of Group Benefits said it needs to increase its spending authority to be able to pay for the claims under its contract with CVS Caremark, citing higher-than-expected prescription activity and rising drug prices. About 200,000 state employees, retirees and their dependents use the health plan.
If the Joint Legislative Budget Committee agrees, it would raise the ceiling on how much can be spent under the existing contract, which expires Dec. 31, officials said. A vote on the request is not expected until Dec. 11.
“This contract that we’re talking about is going to move the max payable from $890 million to $980 million,” Heath Williams, CEO of the Office of Group Benefits, told the committee on Wednesday. “This is just a technical adjustment to increase the total contract amount… to allow us to pay the claims through the end of the contract term.”
“We are not asking for cash this morning,” Louisiana Department of Administration Commissioner Taylor Barras told the committee.
The contract is separate from a new emergency agreement between CVS Caremark and the state that will activate next year.
Lawmakers initially approved a one-year deal for CVS Caremark to manage pharmacy benefits for the state health plan in 2025. But in September, they reversed course for 2026, rebidding the work and awarding most of it to Louisiana-based Liviniti.
Liviniti’s contract is worth $749 million, with $24 million in administrative fees, while the contract for SilverScript, a CVS subsidiary, is valued at $399 million with $8 million in fees.
Williams said the need to authorize more spending for pharmacy claims is not connected to CVS Caremark’s profit margin.
CVS Caremark keeps about 2% of the total contract as an administrative fee, Williams said. The rest passes through to pharmacies and manufacturers to pay for prescription drugs used by the health plan’s members.
“All other terms and conditions of the contract remain the same,” he said. “This contract does not result in any increased compensation to Caremark. It is allowing us to reimburse the vendor for the claims that our members are incurring.”’
Sen. Glen Womack, a Republican from Harrisonburg who serves as the committee’s budget chairman, asked how much money the state receives in drug rebates.
Williams said rebates are “significant” – roughly 40% – and that once the rebates and subsidies are factored in, the state’s actual prescription costs will be far lower than the $980 million contract cap, likely closer to about $600 million.
“And that’s the point to make today,” Williams said. “From a net standpoint, after you incorporate rebates and subsidies and everything we get back, we’re going to be substantially less.”
