MANAGED CARE

State Medicaid agencies blast PBMs' claims tactics

While President Bush and many in Congress are advocating that pharmacy benefit managers play a major role in providing prescription drugs to Medicare beneficiaries, state Medicaid agencies are finding PBMs difficult to work with. A report by the Office of Inspector General of the Department of Health & Human Services found that 32 states experienced problems with PBMs, and those problems were more than with "all other types of third parties combined."

The OIG report examined state efforts to get pharmacy payments from liable third parties when Medicaid beneficiaries have other insurance. Medicaid is designed to be the payer of last resort. The report said 32 states recovered only 17% of the $440 million in potential recoveries they were owed in 1999. The other 18 states could not come up with figures.

The report did not identify any PBMs by name, but it noted that 26 states had mentioned one PBM as being particularly difficult to work with. "Two states said the company has not paid them for years," the report stated. "One of these states said it stopped sending claims to this particular pharmacy benefit management company because 'they just ignored them.' Another state said it had 'talked with [the PBM's] attorneys and gotten a complete runaround.' The same state reported losing 'tens of millions' of dollars because of this company."

The states also told OIG that claims were often denied for vague reasons and required repeated submissions with no guarantee of success. "We were told one PBM does not point out all the data elements missing from a claim the first time it denies it," the OIG said. "After each resubmission, the PBM may point out another missing data element from the same claim. States said this same PBM will also deny claims if the data elements are in the wrong sequence. Another state said PBMs were reimbursing their claims at a lower rate as a penalty for being in the wrong format." One state said it had received a batch of 21,000 claims back from a PBM with denial codes that were vague or represented several possible reasons for the denial.

Asked to comment on the OIG report, Brett Martin, director of communications and marketing at the Pharmaceutical Care Management Association, said that member companies are still evaluating the document and don't have any specific response to its charges. "In general, we believe PBMs provide a valuable benefit to consumers and companies that take part in PBM programs," Martin told Drug Topics. For instance, PBMs provide a safety net to consumers and yield cost savings to clients, he added.

The Academy of Managed Care Pharmacy also declined to comment. Judith Cahill, executive director of AMCP, explained that the association covers only the professional, as opposed to business, interests of managed care pharmacists.

Merck-Medco Managed Care LLC has made great strides in terms of Medicaid claims segregation in the past two years, said spokeswoman Ann Smith. In fact, the firm has been recognized for its ability to enhance and improve the process, she added.

AdvancePCS public relations director Blair Jackson said, "Since most of our Medicaid business is Medicaid managed care, I believe the OIG report does not apply to or involve us."

The OIG suggested that legislation be considered to include PBMs in Medicaid's definition of a third-party payer, which would alleviate the difficulties states have in getting them to process and pay Medicaid claims.

Michael F. Conlan

Mike Conlan. State Medicaid agencies blast PBMs' claims tactics.

Drug Topics

Sep. 3, 2001;145:41.