State regulators can do more to help Medicaid patients access medication by providing better oversight of an obscure but influential step of the prescription drug supply chain that starts with the manufacturer and ends with the pharmacist, auditors found.
An audit released Monday by the Secretary of State’s Office found the state’s regulation of pharmacy benefit managers is lax and limited, even though the organizations play a central role in the prescription medications of nearly 1.5 million low-income Oregonians enrolled in the Oregon Health Plan, the state’s Medicaid plan. That’s about one in three Oregonians.
Pharmacy benefit managers are middlemen in the prescription drug industry. They manage prescription drug plans for insurers, negotiating prices with manufacturers and pharmacies. They play a major role in the cost of drugs – Oregon Medicaid insurers spend hundreds of millions on medications a year – and patient access to crucial medications.
“Pharmacy benefit managers play an important role in delivering pharmacy benefits to millions of Oregonians, but as the audit shows, they operate in a complex structure that lacks transparency,” Oregon Secretary of State LaVonne Griffin-Valade said in a statement.
Their business practices can determine the financial health and viability of an independent pharmacy in rural Oregon – regardless of its distance from other pharmacies. Pharmacy benefit managers also influence whether a patient needs to travel to a specialty pharmacy to pick up a certain type of medication or what drugs an insurer will cover.
They can own pharmacies, too. That means that the pharmacies they own can get better reimbursements – and more money – than independent pharmacies, many in small rural towns with limited health care access.
“Pharmacists can help patients better manage their medications and their chronic diseases, which in turn can help them lead healthier lives, reduce hospital admissions and save money for the state, so that is a critical component,” Ian Green, the audits manager for the Oregon Secretary of State’s office, said in an interview with the Capital Chronicle. “We found that generally speaking, independent and community pharmacies have lower reimbursements than national pharmacy chains or specialty and mail order pharmacies.”
Auditors: Vague financial information
In Oregon, Medicaid insurers reported spending $767 million on prescription drug benefits in 2021. The state’s Medicaid insurers, also called coordinated care organizations, contract with the Oregon Health Authority to provide health benefits. They also subcontract with pharmacy benefit managers.
But auditors found that because pharmacy benefit managers are complex organizations with trade secrets it makes it close to impossible to gauge their profits and how much of the money comes from Oregon and U.S. taxpayers who pay for the Oregon Health Plan.
“This opaque system makes it impossible to understand the actual costs of prescription drugs and has garnered attention at multiple levels of government,” auditors wrote, noting that the Federal Trade Commission announced in 2022 it would launch an inquiry into pharmacy benefit managers.
Other findings of the audit are:
- An Oregonian on Medicaid who qualifies and uses a prescription drug can lose access if they move from one part of the state to another. This means they may need to try an ineffective medication first and jump through red tape to get qualified for coverage again. This is because Medicaid insurers assigned to various parts of Oregon have different agreements with pharmacy benefit managers.
“They should have the same access to medications, no matter where they live in Oregon,” Green said.
- Low or unfair reimbursement rates have led to a decline in local independent pharmacies, reducing access in rural regions.
- Other states require pharmacy benefit managers to disclose more, including information about their payments and fees.
- The Oregon Health Authority, which oversees Medicaid, performs “minimal monitoring” of prescription benefit managers.
Audit recommendations
Auditors recommended the Oregon Health Authority require its Medicaid insurers to conduct annual independent audits of prescription benefit managers. Those audits are now optional, the report said.
Auditors also recommended the health authority assign employees to monitor compliance who don’t have a conflict of interest. Currently, the authority has limited staff for compliance because employees with the necessary expertise work with the authority’s Oregon Prescription Drug Program, which purchases prescription drugs for programs including Oregon Health and Science University and the Oregon State Hospital.
The Oregon Health Authority agreed with the recommendations. In a response letter, the authority said it should have more staff assigned by mid-2024 and enact requirements for independent outside audits of pharmacy benefit managers by January 2025.
Auditors also recommended lawmakers pass bills that would change the system, including a universal list of covered prescription drugs for all Medicaid insurers to ensure fairness and equal access, and requirements for pharmacy benefit managers to provide data annually, including information about its fees and profits.
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