Kansas Attorney General Derek Schmidt Secures $ 27 Million Settlement From Pharmacy Benefits Manager | KCUR 89.3
Kansas Attorney General Derek Schmidt struck a deal with one of the nation’s wealthiest corporations for about $ 27.6 million for alleged misconduct involving the state’s Medicaid program and prescription drugs.
Centene Corp. helps manage the state’s privatized Medicaid program. Schmidt says the company’s secret practices have cost Kansas and its taxpayers several million dollars.
Schmidt says the $ 27.6 million settlement is more than double the amount of damages his office was able to prove.
“We think it’s a fair result,” he said in an interview. “It penalizes the company for its misconduct.”
Centene faces similar charges in other states regarding his role as a pharmacy intermediary hired to help states obtain good drug prices. He denied the wrongdoing.
However, the company – No.24 on the Fortune 500 – reduced massive checks to states over the allegations and reserved $ 1 billion for more colonies.
Earlier this year, Centene announced deals with Ohio for $ 88 million, Mississippi for $ 55 million, Illinois for $ 56 million and Arkansas for $ 15 million.
Centene and its subsidiary Envolve help run Medicaid programs in 30 states. He sent the Kansas News Service a brief statement describing the settlement as a “no-fault deal.”
“We respect the deep and critically important relationships we have with our state partners,” the statement said. “This no-fault deal reflects the importance we place on addressing their concerns.”
Schmidt said Centene had agreed to change its practices.
“Regardless of whether or not there is an explicit admission (by Centene of wrongdoing),” the attorney general said, “they are paying millions of dollars for their past behavior and agree that their future behavior will change.”
Centene continues to help manage the Kansas Medicaid program, but he will have to compete to retain that role when the Kansas Department of Health and Environment opens an upcoming tender.
Schmidt said Centene engaged in a host of strategies that meant Kansas taxpayers were overpaying for prescription drugs.
For example, he would charge Kansas a price for a drug, while also getting a lower price from the manufacturer, he said. Centene could then pocket the savings by keeping Kansas in the dark about the real price.
“The misconduct was such as to find ways to reduce the cost of purchasing drugs, but not pass the savings on to the state,” Schmidt said. “From now on, the company will provide detailed prices for each stage of a transaction. And that in turn will allow the state to maintain a much more effective type of surveillance. “
Schmidt was unwilling to reveal the exact amount that Centene’s strategies, including secret manufacturer discounts, cost the state of Kansas. He said his office and Centene disagreed over the sum.
The regulation covers 2016 until last month. Schmidt said Centene’s misconduct may have started before 2016. If it did, it wouldn’t fall under the statute of limitations.
His office was ready to sue Centene, but the company decided to keep the case out of court.
A portion of the settlement money – 15% – will go to Liston & Deas, a law firm that helps states investigate and pursue potential settlements or lawsuits against Centene.
Centene is one of the top three companies that help run the Kansas Medicaid program.
The other two are CVS / Aetna and OptumRx / UnitedHealth.
Among other things, they serve as pharmacy intermediaries, processing drug claims for Kansas.
These three also helped manage prescription drugs for the Ohio Medicaid program when that state’s auditor found in 2018 that its middlemen were charging $ 225 million more than they paid pharmacies for. drugs and took that money for profit.
The mark-up on generic drugs alone added almost a third to the price the state paid for these supposedly profitable drugs. Ohio effectively laid off the companies involved and restructured its program to increase surveillance.
The revelations in Ohio prompted other state auditors and attorneys general – including Schmidt – to begin reviewing their states’ Medicaid programs.
When asked if his office is investigating other companies regarding the Kansas Medicaid program, Schmidt said he could not discuss the status of the investigations or their targets. But he added:
“We were able to obtain the recovery of this first defendant. And… we have other investigations underway.
Kansas privatized Medicaid in 2013 under the leadership of Governor Sam Brownback.
But the Brownback administration and subsequent administrations of Jeff Colyer and Laura Kelly never audited the prescription drug program.
Investigations in other states and at the federal level have found that Medicaid programs in privatized states are particularly vulnerable to drug overpayment, as oversight becomes even more difficult.
Concerns about pharmacy intermediaries – formerly known as pharmacy benefit managers – extend beyond Medicaid programs.
Employers also hire intermediaries to process drug claims.
Experts say the Kansas State Employee Health Program, which covers about 80,000 public employees, retirees and family members, could be overpaid by millions.
Private employers face similar challenges. Secrecy in the country’s drug supply chain makes it difficult for them to understand why drugs are so expensive and whether drug intermediaries hired to cut costs are actually inflating prices.
Americans pay more than twice as much as people in other developed countries for prescription drugs.
Schmidt wouldn’t say if he probes the prices paid by the Kansas State Employees Plan. As for the challenges facing private employers:
“This is conduct that we will not be able to achieve directly through our app on behalf of the state,” Schmidt said. “There are political discussions that the legislature might want to undertake. “
In recent years, states have passed dozens of laws requiring more transparency from pharmacy intermediaries or otherwise regulating them.
Pharmaceutical intermediaries have sued one of those states, Arkansas, to block the regulation. Arkansas fought the case all the way to the United States Supreme Court, who ruled in his favor. This will likely encourage more states to consider legislation.
Schmidt signed an amicus brief supporting Arkansas’ right to regulate drug benefit managers.
“It would make sense for Kansas to have regulatory status, similar to what is done in Arkansas,” he said. “This is a largely unregulated area where there is strong reason to believe… that regulation is recommended.”
Celia Llopis-Jepsen reports on consumer health for the Kansas News Service. You can follow her on Twitter @celia_LJ or email her at celia (at) kcur (dot) org.
The Kansas News Service is a collaboration of KCUR, Kansas Public Radio, KMUW, and High Plains Public Radio focused on health, the social determinants of health and their link to public policy. Kansas News Service stories and photos may be republished by media at no cost with appropriate attribution and a link to ksnewsservice.org.