Task force: Is Louisiana Medicaid drug spending inflated?

October 26, 2017 GMT

BATON ROUGE, La. (AP) — Louisiana appears to be shelling out millions of dollars more for Medicaid patients’ prescription drugs than it pays to pharmacies, with the extra money pocketed by private companies managing the patients’ care.

A task force created by lawmakers is searching for waste in Louisiana’s $12.5 billion Medicaid program and wants more details on how those deals work — and how much money the state is steering to middle-managers above what the pharmacists receive.


The task force wrote to the health department Wednesday, questioning whether pharmacists are getting low Medicaid reimbursements to help boost profits for private companies that coordinate health services for 90 percent of Louisiana’s Medicaid patients.

The letter cited a recent independent audit done for the Department of Health that identified at least $42 million in drug charges for Medicaid patients that were kept by private companies after pharmacists were paid for filling prescriptions.

“When the state chooses to do business with profit-driven entities, great effort should be made to ensure that money is not being wasted,” task force leaders wrote to Jen Steele, Louisiana’s Medicaid director.

The letter was signed by Legislative Auditor Daryl Purpera, Senate Health and Welfare Chairman Fred Mills and Rep. Tony Bacala, whose legislation created the task force.

Mills, a St. Martin Parish pharmacist, said Thursday the questions are aimed at learning what the Department of Health is doing to regulate the private companies that run much of the state’s Medicaid program.

“Are we spending money wisely?” he asked.

Mills, whose store fills prescriptions for Medicaid patients, said pharmacists get reimbursed for certain medications at Medicaid rates that don’t even cover the costs to stock the drugs.

Louisiana contracts with five managed-care companies to coordinate health services for most of its Medicaid patients. The deals are worth billions and cover nearly 1.5 million people — pregnant women, children and adults who receive the government-financed coverage through the Medicaid expansion program. The state pays a per-member, per-month fee for each Medicaid patient enrolled in a health plan with the companies.

When a Medicaid patient gets a prescription from a pharmacy, the managed-care companies reimburse the pharmacies for the medication through “pharmacy benefits managers,” firms that are either owned by the managed-care companies or have a contractual relationship with them.


The pharmacy benefits manager, however, often charges the managed-care company more for the drugs than the amount paid to pharmacists and then keeps the difference — in addition to a fee already paid to the company for its work, according to the task force letter.

The health department’s contracts do not prohibit such financing arrangements, but do limit the payments for such “non-medical expenses” allowed under the deals, agency spokesman Bob Johannessen said in an email.

The health department “is always concerned about the efficient use of state resources to meet member needs, and for that reason has imposed limits on (managed-care organization) administrative expenses,” Johannessen wrote.

A recent audit for the health department found $42 million in such charges retained by the pharmacy benefits managers that were incorrectly listed as “medical costs” by the managed-care companies, according to the letter.

Steele told the task force she’d work on getting answers to the detailed drug spending questions by the task force’s next meeting in November.

Payments to the Medicaid managed-care health plans have grown as Gov. John Bel Edwards’ administration boosted the number of Medicaid enrollees by 440,000 with the expansion authorized under the federal health care overhaul.

The current managed-care contracts began in 2015 under former Gov. Bobby Jindal’s administration and are set to expire in January. But the Edwards’ administration is proposing to continue them through December 2019. Lawmakers postponed a decision on the contract extensions while seeing more information. Another hearing is set for Nov. 3.


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