Case study of attempts at drug-pricing reforms in Ohio shows promise and peril for the Trump administration and Congress

Phones ring all the time across a newsroom. But when one of my colleagues answered a call by saying, “Good morning, governor,” all of us sitting near her quickly took notice.

Just a few weeks after taking office in 2019, Ohio Gov. Mike DeWine had been reading the dozens of stories our team at The Columbus Dispatch had written on how little-known pharmacy benefit managers were bleeding the state.

So he called us to give us a scoop on his plan to revamp how prescription drugs are funded by the multibillion-dollar Medicaid program that provides health coverage for about 3 million low-income Ohioans.

“I want to save taxpayer dollars. It’s pretty simple,” DeWine said during the phone call. “The PBM system, we think, has ripped us off.”

Eventually, the state decided to beat the controversial PBMs at their own game. Ohio became the first state to kick out these middlemen in the pharmacy supply chain, which, according to independent studies, had been overcharging Medicaid by well over $200 million each year. It created a new, state-overseen single PBM to run the Medicaid drug setup, dumping PBMs that are part of Fortune 16 companies: CVS (which also owns Aetna), UnitedHealth and Cigna.

It was a high point in Ohio’s nationally noticed effort to bring accountability to PBMs.

“Ohio has certainly been a leader on these issues,” Seema Verma, then administrator of the Centers for Medicare and Medicaid Services, told The Dispatch in 2020.

Meanwhile, the Ohio legislature was becoming a national leader in reforms, from outlawing gag rules PBMs put on local pharmacists to banning “clawback” clauses the PBMs used to extract additional cash from pharmacies weeks or even months after a transaction with a customer.

And Ohio Attorney General Dave Yost scored with lawsuits accusing PBMs of wrongdoing, most notably a precedent-setting $88 million settlement in 2021 with health-care giant Centene, the for-profit insurer that manages Medicaid plans for many states.

The American Pharmacists Association proclaimed that same month: “The PBM fire that started in Ohio is spreading across the states—and APhA is fanning the flames.”

What’s happened in Ohio shows both the opportunities and challenges of drug price reform – lessons for theTrump administration and Congress as they try to enact sweeping changes, as well as for other states doing the same thing.

For example, the U.S. House-passed budget bill contains numerous PBM-related provisions, including a “pass-through pricing” model for Medicaid. But Ohio Medicaid already tried and dumped the “pass-through” approach after the ever-creative PBMs found ways to circumvent this attempt to bring transparency and financial accountability. What Ohio then decided to do was contract with a single PBM, called Gainwell.

Most Ohio experts deem the single PBM a success for saving the state millions since it was launched in October 2022. Still, the financial reward over its initial two years was less than half the amount the state projected.

Ohio seemingly is losing its momentum in other areas as well.

After the initial burst of activity, Ohio legislators’ more recent attempts to lower drug prices have gotten bogged down in politics and behind-the-scenes opposition. State lawmakers have renewed their efforts this year to pass revamped reforms, from new protections for Ohio pharmacies in the proposed state budget to a just-introduced measure designed to make sure all customer payments count toward patients’ copay maximum, even if some of the payments came from a drugmaker.

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Attorney General Yost’s push for reforms via lawsuits has gotten stuck in the courts, so much so that he says PBMs’ resistance may outlast his term-limited eight-year tenure, which ends at the start of 2027. For example, he is still waiting for the resolution of a 2018 case that has had no new filings since 2021.

“PBMs are well armed in the state now,” said Antonio Ciaccia of Columbus, a nationally recognized drug-pricing expert instrumental in bringing PBM machinations to light in Ohio.

“It’s not lost on me that in every state across the country, Ohio is still a big part of the ‘why’ (to enact reforms) – like this is what they did, this is what Ohio found. And you know, PBMs have a vested interest in trying to unravel Ohio to make it appear as if it was illegitimate or that the people were only getting a curated view of that version of the story.”

So, how much has the state saved? Well, after two years of a single Medicaid PBM, about $70 million annually, per an actuarial study released in April by Milliman Associates, the state’s consultant. While impressive, that figure is considerably less than the projected savings of $150 million to $200 million a year. Ohio Medicaid Director Maureen Corcoran readily owns the shortfall: “I think we’re perfectly comfortable saying it’s about half of what we initially projected.”

Why so sanguine? Because Ohio Medicaid reaped several other significant benefits on top of saving $70 million a year.

For example:

• Ohio pharmacies are now receiving much higher payments for filling Medicaid prescriptions. Under the old managed-care model, the pharmacies were getting an average “dispensing fee” of 73 cents per transaction – not nearly enough to cover their costs. The new setup averages more than $9 each. In all, that’s putting about $350 million a year into Ohio pharmacies’ coffers, versus well under $50 million a year previously.

  “So there was a significant chunk of money that was paid directly to the (pharmacies) that didn’t go into the pockets of the PBM” like it did under the old system, said Sean Eckard, pharmacy director for Ohio Medicaid. “I think that’s another important talking point when we’re thinking about (the single PBM). We’re also talking about the amount of funding that has been returned to the pharmacy providers to make the business of pharmacy in Ohio viable again.” Or, as Corcoran put it, “They’re not going out of business because of us.”

• The total net savings don’t include an already-anticipated $115 million-a-year reduction in costs to administer Ohio’s Medicaid drug program, mainly the result of no longer needing to deal with seven managed-care organizations, even though the state hired additional pharmacists and consultants. 

• Almost every pharmacy in Ohio now takes Medicaid prescriptions, reducing the number of pharmacy deserts for the poor. And the availability of accredited specialty pharmacies, which typically provide the most expensive drugs, has zoomed from three or four to almost 250, Eckard noted. That gives those on Medicaid “the freedom of choice to be able to choose their pharmacy provider” instead of being forced into one tied to a PBM, he said.

• Twice-a-year surveys of Ohio pharmacies’ prices lead to more accurate Medicaid pricing. “Our response rates are usually around 80% on any given survey that we do, whereas in the National Average Drug Acquisition Cost (NADAC), typically you have response rates of 10 to 20%,” Eckard said. “That allows us to pay a significantly closer number to what the actual acquisition cost was for the provider.”

The House-passed budget would mandate pharmacy participation in NADAC, which would make the national index more accurate and drive down costs.

In 2023, Gainwell ran into difficulties handling prior authorizations from the single PBM needed before a doctor’s prescription could be filled.

“We get somewhere between 40,000 and 60,000 prior authorizations a month, and so they missed, I’ll say, a little more than a handful of them,” Eckard said.

Medicaid’s top lawyer, Steven Voigt, chastised Gainwell for forcing the state’s taxpayer-funded pharmacists to help solve the problem – “doing Gainwell’s work. These pharmacists have been pulled away from other important work of the agency to assist Gainwell with its backlog.”

Eckard called the ensuing penalty “actually rather severe” – $2,500 per violation.

He pointed out that Gainwell is required to act on prior authorization requests within 24 hours, no matter when it is filed, a deadline that is “the most stringent in the industry.” The company employs 50 to 70 pharmacists plus medical directors to handle the requests, Eckard said. Now, Gainwell has set up electronic requests (replacing the traditional fax) so doctors sometimes can gain instant approval, he said. That means Medicaid recipients often can fill their prescriptions immediately.

“Once we got through that initial period, they’ve done a very good job of keeping in compliance,” Eckard said.

In 2024, Gainwell was fined $200,000 by the state for not filing required reports on steps to maintain security with Medicaid drug data.

“As I have conveyed, (the Medicaid department) is extremely troubled by the failure to be forthcoming with the reason for the delayed reports,” Voigt wrote in an Oct 28 communique.

The reports were due July 1 of last year but were not filed until Nov. 4.

Eckard said Gainwell staffers worked nights and weekends to fix the problem. “But again, it did come late. We were not happy about that, and we are watching that. We continue to watch it. We don’t feel that that’s going to be an issue again, but it is something that we do watch,” he said.

“One thing that we can say about Gainwell is that they have been a very good partner in operating this program. And that is really evidenced by (the fact that) we’ve not missed a payment to pharmacies since we started the program.”

Eckard said surveys of Ohio pharmacies reveal double or triple the level of satisfaction with Gainwell versus the old setup with multiple PBMs. 

Even if Trump and Congressional leaders pull off sweeping changes, they could face battles from within as they try to implement the changes. Even today, not everyone in Ohio is sold on the single PBM approach, saying Medicaid officials haven’t communicated exactly why it’s worthwhile.

“I’m not confident that anyone has all the information needed,” said state Rep. Adam Holmes. He leads the Ohio legislature’s Medicaid watchdog, called the Joint Medicaid Oversight Committee. The view of state lawmakers is crucial since their approval is needed to continue the single PBM.

The bicameral panel’s consultant has experienced difficulty prying loose information from state Medicaid officials, Holmes said. And suspicion remains from what some view as an attempt by Corcoran two years ago to pare back the legislature’s oversight role.

Corcoran acknowledges an attempt via Gov. DeWine’s state budget proposed in 2023 to remove the legislative panel from some of its statutory duties in setting Medicaid rates. But she said it was designed as a temporary move to help the state deal with complex funding issues as it pulled out of the COVID pandemic. Legislators rejected the attempt.

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In that same year, Corcoran’s team made unilateral changes to the state oversight committee’s projection of Medicaid revenue, a key duty specifically given to lawmakers in state law. She said the revisions were needed due to mistakes. However, the oversight committee’s actuary, CBIZ Optumas, challenged the changes that were in effect attributed to the company: “This is not an appropriate use of our report and does not follow its methodology,” an executive said in a March 2023 email.

“I think it’s a huge, huge mess,” said former Rep. Scott Lipps, who led several legislative battles against PBMs as chair of the House Health Committee.

The revelation that Medicaid found Gainwell’s early reports potentially “misleading” and that the company initially wasn’t pursuing possible security problems damaged the single PBM’s credibility, Lipps said. And it led to many questioning Medicaid’s numbers backing up Gainwell.

Despite the stumbles, drug-price guru Ciaccia said Ohio’s single PBM represents a huge improvement over the way the state used to fund prescription drugs for the poor.“There are things that I would still nitpick over how that system is designed,” he said, such as the need to more frequently check Ohio’s drug prices to set Medicaid’s corresponding charges. “But at the end of the day they solved the problems.”

Dave Burke, a former state senator who now heads the Ohio Pharmacists Association, is also a fan of the sweeping changes. But he also sees the limits on what an individual state can do, which means federal intervention is needed, and quickly.

“I do think Congress is going to act,” he said. “To me, it’s probably going to have to be resolved this year.”