What I want to focus on today is a different trend, which is how states, led by Ohio and Kentucky, are actually nationalizing a key mechanism to organize pharmaceutical prices. Yes, nationalizing, aka having the state take over a private business and run it. And it’s working fantastically well.
Every state runs a health insurance program for low income residents, known as Medicaid, and it buys a lot of pharmaceuticals. Like a lot of state services, Medicaid drug purchases are contracted out, usually to the big conglomerates. Ohio used to use pharmaceutical benefit managers CVS Caremark and UnitedHealth Group’s OptumRx to run its Medicaid program, but these firms were high-priced and gave bad reimbursements to local pharmacies. They also imposed “gag orders” so that those pharmacists weren’t allowed to tell customers when they could get a lower price for medicine. In 2018, the Columbus Dispatch conducted an investigation and found that they were also ripping off the state, charging Ohio “a lot more for drugs than they were paying the pharmacies that had bought and dispensed them.” Ruh-roh.
I’m SHOCKED!
In 2019, the Ohio General Assembly passed House Bill 166, which instructed the Ohio Department of Medicaid to form a Single Pharmacy Benefit Manager (SPBM), which it launched in October of 2022. Unlike the big PBMs, which were owned by insurance companies and chain pharmacies, Ohio’s public PBM had no conflicts of interest. Pharmacies got paid a standard price for dispensing drugs and there was no steering or “spread pricing” whereby the corporate middlemen secretly kept fees meant to lower the price of drugs. The big PBMs predicated doom, naturally.
So what happened? Well after two years, a well-respected consulting firm was retained to study the results. And they were good. Very good. There was substantially less bureaucracy, and the state saved $140 million over two years, even as dispensing fees to pharmacies increased by 1200% on average.
At roughly the same time, in 2021, Kentucky also nationalized its Medicaid PBM, saving $283 million in just one year, $56.6 million of that being state money and the rest being Federal outlays, which pays for much of Medicaid. They heard the same scare story.
In this case commie government proved more efficient than capitalist free market.
Time expand the program to all state medicaid programs plus Medicare methimks