Optum audit shows possible law violation, lower payments to independent pharmacies

https://mississippitoday.org/2024/11/07/optum-audit-shows-possible-law-violation/

The findings of a recent audit of a major company that manages prescription benefits revealed it may have violated Mississippi law.

The review of Minnesota-based Optum’s business practices by the Mississippi Board of Pharmacy indicated that the company paid independent pharmacies in Mississippi rates lower than chains and Optum-affiliated pharmacies for the same prescription drugs. 

The audit uncovered over 75,000 instances in which Optum-affiliated pharmacies’ lowest payments for a prescription drug were higher than at unaffiliated pharmacies in one year, including chain and independent drug stores. 

Mississippi state law prohibits pharmacy benefit managers from reimbursing their affiliate pharmacies, or ones they own, at higher rates than non-affiliate pharmacies for the same services. 

In some cases, patients footed the bill: consumers were almost twice as likely to pay the full cost of a prescription drug claim without contributions from their insurance plan at independent pharmacies than at affiliated pharmacies. 

The Board of Pharmacy will hold an administrative hearing based on the alleged violations of Mississippi law on Dec. 19. Board staff declined to answer questions about the audit or its findings. 

“I think this proves that we need to have more transparency, we need to have more PBM reform in Mississippi and across the country and even on a federal level,” said Robert Dozier, the executive director of the Mississippi Independent Pharmacy Association, an organization that advocates for 180 pharmacy members.

Optum declined to answer specific questions about the audit. The company has identified errors in the audit’s findings and methodology and submitted them to the Board of Pharmacy, said Isaac Sorenson, a spokesperson for Optum. 

“The pharmacy – and local pharmacists – play a vital role in supporting people’s health and we are committed to paying them fairly,” he said. “…For pharmacies in rural and underserved communities, Optum Rx is deepening its commitment to support their role by launching new programs, expanding existing initiatives and launching a new pharmacy network option for customers.” 

He said the new pharmacy network option will provide pharmacies with increased reimbursements. Generic drugs will be reimbursed at 5% higher rates and brand name drugs at .2% higher rates. 

Optum is owned by health care behemoth UnitedHealth Group Inc., the U.S.’ most profitable health care company and the owner of the nation’s largest health insurance company, UnitedHealthcare. In 2023, the company reaped $32.4 billion in earnings. 

Pharmacy benefit managers are private companies that act as middlemen between pharmacies, drug manufacturers and insurers. They process prescription drug claims, negotiate pricing and conditions for access to drugs and manage retail pharmacy networks. 

Optum is one of the largest three pharmacy benefit managers in the U.S., which together account for 79% of prescription drug claims nationwide. 

The results of the audit echoed some of the conclusions of a Federal Trade Commission report published in July: large pharmacy benefit managers pay their own, affiliated pharmacies significantly more than other pharmacies and set reimbursement rates at untenably low levels for independent drug stores, or retail pharmacies not owned by a publicly traded company or owned by a large chain, said the report. 

Mississippi Today reported last month that many Mississippi independent pharmacists fear they may be forced to close their businesses due to low reimbursement rates from pharmacy benefit managers. 

Pharmacy benefit managers have an incentive to steer customers towards their affiliate pharmacies and compensate them at higher rates, which can disadvantage unaffiliated pharmacies and lead to higher drug costs, said the Federal Trade Commission. 

Optum’s affiliate pharmacies include Optum Home Delivery Pharmacy and Optum Specialty Pharmacy. 

The audit revealed that Optum uses 49 different maximum cost lists, or schedules created by pharmacy benefit managers that determine the highest price they will pay pharmacies for generic drugs. Maximum cost lists are proprietary and confidential, even to the pharmacies that are reimbursed based on the lists, and change continuously.

“I think that’s 48 too many,” said Dozier. “There should only be one MAC list.”

Fifteen are used exclusively at independent pharmacies and 22 are used solely at chain pharmacies. 

An analysis of the maximum allowable cost lists showed that independent pharmacies were reimbursed at rates 74% lower than chain pharmacies on average.

An analysis of a generic drug used to treat bacterial infections yielded a payment to an Optum-affiliated pharmacy that was eight times higher than the lowest-paid independent pharmacy on the same day. Chain and affiliate pharmacies were paid over 20 times as much as independent pharmacies for a generic drug used to treat stomach and esophagus problems.

Pharmacies’ attempts to contest low reimbursement rates were often unsuccessful, showed the audit. 

Ninety-eight percent of pharmacy appeals were denied, most commonly because they did not include information about how much the pharmacy paid to acquire the medication from a wholesaler. 

Mississippi law prohibits pharmacy benefit managers from reimbursing pharmacies at rates below their cost to acquire the drug, even when using a maximum allowable cost list. But the audit revealed over 400 times that Optum denied pharmacies’ appeals on those grounds, saying that the maximum cost list was accurate. 

The audit, which studied Optum in 2022, was the first commissioned by the Mississippi Board of Pharmacy after revisions to state law in 2020 gave it more regulatory authority over pharmacy benefit managers. 

It took the board several years to hire staff to enact the law and receive approval to increase its budget due to the high costs of audits, the board’s executive director Susan McCoy told lawmakers at the House Select Committee on Prescription Drugs Aug. 21 at the Capitol.

The board also has pending administrative proceedings with the other largest pharmacy benefit managers in the country, Express Scripts and CVS Caremark. Neither is the result of an audit. Both hearings are scheduled for Nov. 21. 

Optum has already faced scrutiny for its business practices in Mississippi. In August, Attorney General Lynn Fitch filed a lawsuit alleging that Optum and several other pharmacy benefit managers stoked the opioid epidemic by plotting with manufacturers to increase sales of the addictive drugs and boost their profits. The suit also named Evernorth Health and Express Scripts, along with the companies’ subsidiaries.

Filed under: General Problems