PBMs overcharged Michigan Medicaid by $64M, report claims

Pharmacy benefit managers in Michigan overcharged the state's Medicaid program by at least $64 million, a new report  by the Michigan Pharmacists Association and 3 Axis Advisors claims.

Researchers collected data from 451 community pharmacies and nearly 2 million generic prescriptions dispensed to Medicaid beneficiaries over a two-year period to analyze a practice known as spread pricing. The practice, which has come under fire in the last year, is the difference between what a PBM reimburses a pharmacy for a medication and what it charges the payer, in this case, the Michigan Medicaid program.

The report found that in just two years, the spread margin on generic drugs rose from 6 percent of the managed care program's costs to more than 34 percent.

In addition, between 2016 and 2018, Michigan pharmacies received just 49 cents above the National Average Drug Acquisition Cost, a reference-based pricing benchmark set by CMS. As a result, generic drug costs increased for the state Medicaid program.

"Based on this data, we can infer that our state has spent at least $64 million more than necessary on prescriptions. This money was funneled back to PBMs, rather than helping poor, underserved, or disabled patients receiving Medicaid managed care," Michigan Pharmacists Association CEO Larry Wagenknecht said. "We need to address the spread pricing problem and ensure that these large, Fortune 500 companies can no longer take advantage of pharmacists and patients who depend on a fair system."

Read the full news release here.

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