June 21 (UPI) -- When Ohio switched its government health coverage program from a fee-for-service model to one of managed care in 2011, it began saving $145 million each year, a new study shows
However, researchers think the change may have led to higher overall expenses for the state, according to findings published Thursday by the Journal of the American Medical Association.
"The Ohio audit found pharmacy benefit managers engage in opaque pricing practices that likely contribute to the rising costs of care and prescription," Trevor Royce, an assistant professor of radiation oncology at the University of North Carolina School of Medicine and study corresponding author, said in a news release.
Pharmacy benefit managers are third-party administrators who work to negotiate pharmacy benefits. In Ohio, the managers are largely credited with helping to reduce the prescription claim prices for the state.
According to the study's researchers, after investigating the Ohio program they uncovered several anti-competitive and price manipulating practices. For example, the researchers say the Ohio pharmacy managers offered affiliated pharmacies and independent pharmacies different prices. They instituted "gag clauses" to keep pharmacies from telling patients the most cost-beneficial drug options.
The managers also used "spread pricing," where they paid a lower price for prescription drugs while charging Ohio Medicaid a much higher price, according to the researchers. That difference in price could net the managers a hefty revenue.
For example, in 2017, Ohio prescription managers paid $3,859 for a 30-day supply of imatinib mesylate, a generic Leukemia drug, but charged Ohio Medicaid $7,201.
After Ohio commissioned an independent review of the pharmacy benefit manager practices, it found a nearly 9 percent difference in what the managers paid to pharmacies and what they billed to Ohio Medicaid.
In all, more than 39 million prescription transactions created a spread pricing difference of $223.7 million.
To fix the problem, state officials changed Medicaid policy in several ways. They canceled the managed can plans contracts with pharmacy benefit managers.
In addition, Ohio started a "pass through" pricing model where the managed care plan pays the pharmacy benefit manager and the pharmacy the exact amount for the same prescription drugs, along with a dispensing fee and administration fee.
Royce hopes what took place in Ohio can serve as a lesson in other states.
"Efforts to address drug pricing tend to focus on the pharmaceutical company or the drug manufacturer, while traditionally the pharmacy benefit managers may be overlooked," Royce said. "This is likely changing as a growing number of states have introduced bills pertaining to pharmacy benefit manager practices, and more are surely to come."