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States Probe Business Practices of Pharmacy Benefit Managers

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Several states are investigating pharmacy benefit managers, with some saying they are focused on whether the companies fully disclosed details about their business and potentially received overpayments under state contracts, according to state officials and documents.

States including Ohio, Oklahoma, Georgia, New Mexico, Kansas, Arkansas and Mississippi, as well as the District of Columbia, are scrutinizing PBMs, according to the offices of state attorneys general and auditors, as well as public documents including state contracts and securities filings.

Details about the investigations’ focus are typically not public. Officials with some states said they were looking at companies in their Medicaid programs and state-employee plans. Among the companies under scrutiny are units of

Centene Corp.


UnitedHealth Group Inc.


CVS Health Corp.

“I’m aware of many states that are looking at this,” said Ohio Attorney General

Dave Yost,

a Republican, whose office recently sued Centene, alleging it had misled the state’s Medicaid program about its pharmacy-related costs, resulting in overpayments by the state. States are at various stages of examining PBMs, he said, but he expects a couple of new suits to be filed this summer, and “before this is all done, I will be surprised if we don’t have a dozen or more states” bringing complaints against PBMs.

A Centene spokeswoman said it “provides pharmacy benefit programs for Medicaid and Medicare according to the regulations, laws and contractual guidelines issued by state agencies.” The Ohio suit’s claims are “unfounded and will be vigorously defended in court,” she said.

Centene says Ohio’s suit against the company is ‘unfounded and will be vigorously defended in court.’


Jeff Roberson/Associated Press

CVS Chief Policy Officer and General Counsel

Tom Moriarty

said that the company works with state attorneys general “to demonstrate how PBM solutions deliver drug cost savings to clients, including significant savings to state budgets.” He said CVS faced a limited number of state investigations, with some dating back to early 2017.

Pharmacy benefit managers typically work for employers and health plans, managing drug benefits and negotiating pricing with pharmaceutical companies and drugstores. They often have many lines of business that involve state governments, including handling the drug benefits of state employees and working with managed-care companies that administer Medicaid benefits.

At many large companies, including UnitedHealth, Centene,

Cigna Corp.

and CVS, the same parent owns both a PBM and a managed-care operation.

Mr. Yost said his office is continuing its investigation of PBMs. In addition to Centene, the Ohio Medicaid program uses UnitedHealth, among others. In March, the state filed its suit against Centene, which is seeking millions of dollars in damages.

Earlier, the state sued Cigna’s Express Scripts, alleging it had overcharged the Ohio Highway Patrol Retirement System, and UnitedHealth’s OptumRx, alleging it had overcharged the Ohio Bureau of Workers’ Compensation.

An OptumRx spokesman said the company believes the “allegations are without merit.” He declined to comment on state investigations. A Cigna spokeswoman declined to comment.


What do you think will be the outcome of the investigations into the business practices of pharmacy benefit managers? Join the conversation below.

In its most recent quarterly filing with the Securities and Exchange Commission, Centene noted the Ohio suit and said that “other states are reviewing the practices of PBM service providers, including us, and could bring claims against us.” A recent SEC filing by CVS said the company was being investigated by the “attorneys general of several states, as well as the District of Columbia regarding its PBM practices, including pricing and rebates.”

The stakes for Centene and other companies are particularly high when states bring suits related to their Medicaid programs, which are a major business for managed-care firms. Ohio recently announced the winners of new contracts for its $20 billion Medicaid managed-care program, starting in 2022. But the state Medicaid agency said it had to defer its decision about Centene, which is currently a Medicaid plan in Ohio, due to the claims in the state’s suit against the company.

Ohio is also switching its Medicaid program’s $3 billion pharmacy benefit to one firm, rather than having each managed-care company contract with its own PBM.

The state investigations “are concerning in terms of it being an overhang on the Medicaid business,” if the probes or any resulting suits jeopardize state contracts, said Matthew Borsch, an analyst with BMO Capital Markets.

Several states, according to publicly available contracts and state officials, have hired the same law firm, Liston & Deas, to investigate PBMs. Those include Ohio, Mississippi, Arkansas and Kansas. W. Lawrence Deas, a partner with the firm, said it was also working with Georgia and New Mexico. The number of states working with the firm is “certainly growing,” he said.

Brian Colón, the Democratic auditor for the state of New Mexico, said his office is examining “drug pricing practices for the managed-care organizations and the pharmacy benefit managers” that serve the state’s Medicaid program and its employee plan. The auditor is looking at whether companies are complying with their contracts and whether the state has been overcharged, he said.

Among the companies in New Mexico’s Medicaid program is Centene, and the state employee plan uses Cigna’s Express Scripts.

A spokeswoman for Mississippi’s attorney general said the office’s investigation was “similar to the Ohio case.” A spokesman for the state’s auditor said its contract with Liston & Deas allowed it to look at all PBM relationships with the state, and “we’re generally expecting this investigation to follow the same course as the Medicaid filing in Ohio.” Mississippi’s Medicaid program uses managed-care companies including Centene and UnitedHealth.

The Centene spokeswoman said its Mississippi plan adheres “to all regulations related to pharmacy benefits.”

A spokeswoman for Arkansas’s attorney general said it is “looking at PBMs associated with medical plans sponsored by the State of Arkansas,” including its Arkansas Works Medicaid program and employee benefit plan. The state’s attorney general has previously said she is investigating CVS. Arkansas Works involves Centene, among other companies.

Representatives of attorneys general for Oklahoma and Kansas, and of Georgia Gov. Brian Kemp, a Republican, confirmed investigations into PBMs. A spokeswoman for the attorney general of the District of Columbia declined to comment.

Write to Anna Wilde Mathews at

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