Centene agrees to settle Medicaid fraud claims with Ohio, Mississippi for $143 million

In what could be a harbinger of more settlements, Medicaid managed-care contractor Centene Corp. on Monday settled potential fraud claims by Ohio and Mississippi for $88.3 million and $55 million, respectively.

Ohio is the only state to file suit so far alleging improper double billing through Centene’s pharmacy middlemen. But Mississippi, Kansas, Arkansas, Georgia, Oklahoma and New Mexico are also reported to be considering such litigation.

In a filing Monday with the U.S. Securities and Exchange Commission, St. Louis-based Centene announced the settlements with Mississippi and Ohio. And it said it had money set aside to settle with other states.

“Additionally, the company announced it is in discussions with a plaintiff’s group led by the law firms of Liston & Deas and Cohen & Milstein in an effort to bring final resolution to these concerns in other affected states,” the filing said. “Consistent with those discussions, Centene has recorded a reserve estimate of $1.1 billion related to this issue, exclusive of the above settlements.”

In announcing the settlement, Ohio Attorney General Dave Yost said that Centene, the largest Medicaid managed-care contractor in the United States, didn’t admit wrongdoing. But he said the amount of the settlement speaks for itself.

“I will accept an apology note that has this many zeros behind it,” he said.

Ohio has been a leader in trying to police middlemen known as pharmacy benefit managers. And Yost said one of the terms of the settlement is that if any other state gets more than $88 million, Ohio will as well.

In a press release, Centene said “the practices described in the settlement focus on the structure and processes of Envolve (a subsidiary), primarily during 2017 and 2018.”

As a managed-care provider, Centene uses state Medicaid money to sign up clients and to manage and pay networks of providers such as doctors to care for them.

To handle the complexity and volume of drug transactions, manage-care providers hire pharmacy benefit managers. They negotiate discounts from manufacturers, create lists of preferred drugs and determine reimbursements to pharmacies.

The PBM industry is highly concentrated and critics argue that the biggest players use a lack of transparency to gouge payers.

The Ohio lawsuit filed against Centene in March accused the company of several kinds of double billing.

It said Centene hired its own PBM, Envolve, which hired another Centene-owned PBM, Health Net Pharmacy Solutions, which hired CVS Caremark, the biggest PBM in the country. Working through that chain of middlemen, the lawsuit said, Centene pocketed $6.7 million a year that was intended to cover pharmacists’ dispensing costs.

The suit also accused Centene’s PBMs of wildly marking up drug prices. During a single week in 2018, that amounted to $400,000, the suit said.

Centene said that starting in 2019, it introduced new rules. 

“Going forward, Envolve will operate as an administrative service provider, not a PBM, on behalf of Centene’s local health plans to further simplify our pharmacy operations,” the statement it released on Monday said.

The company also seemed anxious to reassure states it depends on for billions of dollars worth of business every year.

“We respect the deep and critically important relationships we have with our state partners,” Brent Layton, the company’s president of health plans, markets and products, said in a statement. “These agreements reflect the significance we place on addressing their concerns and our ongoing commitment to making the delivery of healthcare local, simple and transparent. Importantly, putting these issues behind us allows us to continue our relentless focus on delivering high-quality outcomes to our members.”

Pharmacists across the country have for years complained of predatory reimbursement practices by huge pharmacy middlemen. They greeted the news of Monday’s settlement.

“This is just the latest evidence that PBMs have been using their self-infused complexity in prescription-drug pricing to fleece providers and payers for billions,” said Scott Knoer, executive vice president and CEO of the American Pharmacists Association.

Since Medicaid is funded both by state and federal governments the settlement money will be split among those entities, Yost said. Similar arrangements are likely to be made in other states Centene settles with. 

Yost said hoped that Monday’s settlement catches the attention of all big Medicaid contractors.

“I hope that the message is going out to the entire industry across the country,” he said, “that the days of operating behind the curtain as the great Oz are over and that you’re working for the people of these states that hire you to bring value and quality and to do it with integrity.”