Attorney general’s office launches investigation into inflated prescription drug prices

FRANKFORT, Ky. (WTVQ)- The attorney general’s office has launched an investigation into allegations that state pharmacy benefit managers (PBMs) have overcharged the state health insurance programs for prescription drugs and discriminated against independent pharmacies.

The office is seeking details on how the PBMs, hired by state Medicaid managed-care organizations and the state employee health plan, have determined, billed and paid drug reimbursement rates over the past five years in Kentucky.

A report released last month by the state indicated two PBMs took in $123.5 million last year from the state Medicaid program by paying pharmacies a lower rate to fill prescriptions, while charging the state more for the same drugs.

The attorney general says he is investigating PBMs because he wants to identify and recover any profits improperly retained at the expense of the Commonwealth and its taxpayers and ensure Kentucky families have affordable and accessible health care.

PBMs develop and maintain a list of approved and covered medications, negotiate pharmacy discounts and rebates and process and pay prescription drug claims for several state programs.

The attorney general’s office says PBMs were originally established to help companies and government programs better manage pharmacy costs, but have grown into powerful industry middlemen that go to great lengths to hide and complicate drug pricing information.

It is estimated that more than 1.5 million Kentuckians receive pharmacy benefits through Medicaid and the state employee health plan’s PBMs. Thousands of other Kentuckians receive pharmacy benefits through PBMs retained by their private insurance plans.

Kentucky families, lawmakers and independent pharmacists have been voicing concerns about the operations of PBMs.

Last year, Sen. Max Wise, R-Campbellsville, introduced Senate Bill 5, because he said one of the state’s largest PBMs – CVS Caremark, which also owns its own chain of pharmacies – was not pay­ing independent pharmacists enough, putting many at risk of closing.

At the time, discussion centered around the significant decrease in the PBM’s professional dispensing fee of 85 cents per prescription, when the Centers for Medicare and Medicaid Services stated that the fee should be around $10.64, plus the cost of the drug being dispensed.

The provisions of that legislation lead to the recent report by the state and allow the Department for Medicaid Services to have greater oversight of pharmacy benefits once existing contracts expire.

During a September 2017 meeting of the General Assembly’s Interim Joint Committee on Banking and Insurance, lawmakers questioned the practices of PBMs that forced patients to pay more than their medications cost in order to boost profits at the expense of taxpayers and local businesses. At the meeting, a pharmacist from Leitchfield discussed the significant decrease in reimbursement rates pharmacists face.

Last week, the Ohio attorney general sued to recover nearly $16 million in prescription overcharges to the state for the cost of prescription drugs negotiated by PBMs.

On Beshear’s website,, Kentuckians can learn about what is truly at stake in three legal cases that he has joined to ensure health care and pharmacy benefits are not taken away from more than 1.3 million Kentuckians.

Categories: State News

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