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Medicaid Orders Managed Care Plans to Sever Ties with Two Pharmacy Benefits Managers

photo of PBM letter
Medicaid is making the decision based on the companies' "spread pricing" model.

Ohio Medicaid is telling its five managed care plans to sever their contracts with two pharmacy benefits managers and to work up new deals by the beginning of the year. It’s a sudden change for the agency.

In a letter to the managed care plans, Ohio Medicaid Director Barbara Sears said they must stop working with CVS Caremark and Optum, which are using a “spread pricing” model. Sears said the managed care plans have until January 1 to work out deals with PBMs that will agree to a pass-through model, where the plans pay the PBMs’ fees. Sears said that model will be more transparent and won’t cost taxpayers extra money.

A report commissioned by Ohio Medicaid showed the spread between what the state paid the PBMs and what they paid pharmacies added up to $224 million last year, which the state initially declined to say was a good or bad deal.

A court battle continues over the release of that report, which the PBMs say contains trade secrets.

Karen is a lifelong Ohioan who has served as news director at WCBE-FM, assignment editor/overnight anchor at WBNS-TV, and afternoon drive anchor/assignment editor in WTAM-AM in Cleveland. In addition to her daily reporting for Ohio’s public radio stations, she’s reported for NPR, the BBC, ABC Radio News and other news outlets. She hosts and produces the Statehouse News Bureau’s weekly TV show “The State of Ohio”, which airs on PBS stations statewide. She’s also a frequent guest on WOSU TV’s “Columbus on the Record”, a regular panelist on “The Sound of Ideas” on ideastream in Cleveland, appeared on the inaugural edition of “Face the State” on WBNS-TV and occasionally reports for “PBS Newshour”. She’s often called to moderate debates, including the Columbus Metropolitan Club’s Issue 3/legal marijuana debate and its pre-primary mayoral debate, and the City Club of Cleveland’s US Senate debate in 2012.