RD345 - Report on Analysis of Pharmacy Claims – September 29, 2016

Executive Summary:
Arrangements between managed care plans and their contracted Pharmacy Benefit Managers (PBMs) can be very complicated and they may vary between Medicaid plans and commercial plans. There often is a difference between the charges the provider includes on the claims and the reimbursement to providers but only the actual reimbursement to providers is taken into account in developing rates to pay the Medicaid managed care plans.

The managed care plans have certified that the claims submitted to the Department of Medical Assistance Services (DMAS) actuarial contractor, PricewaterhouseCoopers, represent the amounts actually paid to pharmacy providers. DMAS surveyed the Medicaid managed care plans to confirm that there is no “spread” between the paid amount reported on the claims and the amounts paid to pharmacy providers. Based on the certifications made by the Medicaid managed care health plans, DMAS concludes that there is no difference in value in payments made to the PBMs, payments made to the contracted Medicaid managed care health plans and payments to network pharmacies.

The final pharmacy costs used for developing managed care capitation payment rates are based on the claims that managed care plans have paid to contracted pharmacies adjusted by the various pharmacy pricing arrangements employed by the Medicaid managed care health plans and their contracted PBMs. These pricing arrangements include a change in managed care discounts between the base period and the rate period. If the plan has negotiated lower or higher prices after the base period for claims, this adjustment reflects that. Pricing arrangements also include rebates the plans receive directly from pharmacy manufacturers or through its PBM. The final pharmacy costs also include an adjustment to account for administrative costs paid by the Medicaid managed care plan to the PBM. The PBM administrative cost is approximately 1% of the total pharmacy value included in the rates. The total value for pharmacy included in the rate is approximately 99% of the amount paid to network pharmacies. See attached “FY 2016 Capitation Rate Development, Health Plan Encounter Data, Pharmacy Adjustment.”

Pharmacy Benefit Managers are cost effective entities that work with Medicaid managed care health plans to get the most value for the dollar spent. PBMs help health plans to control pharmacy costs while ensuring that pharmaceutical therapy contributes to overall health care of Medicaid members.

The Department recommends no change to the current process.