Oregon Auditor finds pharmacy benefit managers hurt state’s Medicaid program



(The Center Square) – The Oregon Audits Division released an audit of the Oregon Health Authority this week looking at the state’s Medicaid program and the impact of Pharmacy Benefit Managers.

The audit concluded the state’s benefit manager structure is too complicated to understand what value they provide the state regarding Medicaid.

It also said the state’s regulations of the managers are fragmented and limited, making their work opaque to the public.

“It’s always important we make sure taxpayer funds are being spent as effectively as possible, and Medicaid is a prime example,” Audits Director Kip Memmott said in a press release from the Oregon Secretary of State’s office. “It’s the largest and most complex government program in Oregon and provides critical health services to more than one million Oregonians. But the lack of transparency in our current system means it’s almost impossible to tell if we’re truly getting the best use of our funds with these PBMs.”

Pharmacy benefit managers are middlemen who serve as go-betweens among insurance companies, drug manufacturers, pharmacies, and governments.

Created in the 1960s to lower administrative burdens for insurance companies, the companies have ballooned over time, according to the release. Now, they can influence which drugs insurance companies cover and which pharmacies can fill certain prescriptions.

Benefit managers also benefit some companies more than others, the release said. It notes that the three largest PBMs in the United States control 80% of the market share.

“By controlling the price at which drugs get reimbursed, as well as the pharmacy that will fill the prescription, these companies can ensure the pharmacies they own get greater reimbursement rates than independent pharmacies — in some cases, twice as much,” the release said.

Benefit managers interact with state government via contracts with Coordinated Care Organizations. The organizations are networks of healthcare providers who work together to serve Medicaid recipients. Oregon’s 16 CCOs work with the Oregon Health Authority to manage about 90% of the state’s Medicaid clients.

Coordinated Care Organizations spent $767 million on prescription drug benefits in the state in 2021. However, it is unclear how much profit they made and how much came from Oregon’s Medicaid funds.

State auditors said other states have more protections for patients and pharmacies against benefit managers, plus more transparency. Auditors made seven recommendations to the state legislature to improve the healthcare system regarding pharmacy benefit managers.

It also recommended two immediate improvement recommendations to the Oregon Health Authority. Auditors want the Authority to proactively monitor and enforce contracts with CCOs; the authority agreed with both recommendations.

“We audit state agencies and programs like this one to provide meaningful feedback on how agencies can improve their operations to better achieve their missions and goals,” Memmott said. “This work becomes even more critical when significant amounts of money or vulnerable people are involved.”

One can read the full audit here.



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