Kentucky Medicaid Program Takes on the PBM Middlemen

Kentucky Medicaid Program Takes on the PBM Middlemen

Spread Pricing in Medicaid Managed Care programs needs to end.  The state of Kentucky published a report this week showing that Pharmacy Benefit Managers (PBMs) took $123.5 million in hidden fees from Kentucky health plans that serve the state’s low-income population.  Similar to a case in Ohio, the agreements between the health plans and PBMs were those referred to as “spread pricing”.  Spread pricing deals are designed in a way that benefits the PBM when drug prices increase.  In the case of Kentucky, PBMs kept 13% of the total drug expenditures in 2018 equating to $8.70 per prescription.  This was a 43% increase over the $6.07 per prescription in 2017.  What other industry allows you to pass on a 43% increase in compensation?

Managed care organizations who contract with the PBMs on said contracts need to change them or they risk losing their state business.  They need to implement the following three items, and quickly:

  1. Create their own transparency by taking control of pharmacy reporting, benchmarks, and analytics.  PBMs only show you what they choose because they can’t afford for you to see the whole picture
  2. Use credible unit cost benchmarks to identify opportunities that will reduce pharmacy costs
  3. Revisit and improve your PBM and pharmacy contracts.  You can do this by:
  • Moving to pass-through contracts with a locked-in Average Wholesale Price (AWP)
  • Shortening the contracts to a maximum of two years in length
  • Define, in detail, the data you need so that you can provide an independent review of their performance

While this may sound overwhelming for a regional health plan, there is a market-tested solution that can assist you with this effort — Formul8, Pulse8’s Pharmacy Program Management solution. Pulse8 is on a mission to revolutionize healthcare by optimizing financial performance, eliminating waste, and acting as a source of truth for your Risk Adjustment, Quality, and Pharmacy Programs.  To find out how you can save up to 5% on your pharmacy spend, schedule a demo today!

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