The cost of prescription drugs for California’s massive Medicaid program is draining state budgets, so in 2019 Gov. Gavin Newsom turned to the private sector for help.
The new Medicaid drug program, launched in January, is run by a private company.but it is tragically unpreparedand thousands of low-income Californians were without critical medications for weeks, some waiting hours when calling for help.
What happened in the two years between the award of the contract and the start of the project is a case study of what goes wrong when governments outsource core functions to the private sector.
California awarded the Medi-Cal Rx program to a division of Magellan Health, which has expertise in pharmacy benefits and mental health. But Magellan was subsequently annexed by industrial giant Centene, Worth about $50 billionthe company is looking to expand its mental health portfolio.
Centene is already a significant player in the state’s Medicaid drug program — but its track record is questionable. The company was accused by six states of overcharging its Medicaid program for prescription drugs and pharmacy services, and settled for $264.4 million. Three other states have made similar allegations and have settled with the company for an undisclosed amount. When Centene settles civil lawsuits, Denies any wrongdoing.
KHN has learned that California health officials are also investigating Centene.
transfer control
In his 2019 inaugural address, Newsom vowed to use California’s “market power and our moral strength to demand fairer prices from the drug companies that are trolling Californians.”
The state spends on its medicines Medicaidprisons, state hospitals and other programs climbed 20% annually since 2012, so the first-term Democrat released executive order Require California to make its own generic drugs and create partnerships with counties and other states to buy drugs in bulk. He also directed the state to buy prescription drugs for Californians enrolled in Medicaid, which covers about 14 million people.
Newsom no longer wants the state’s two dozen Medi-Cal managed care plans to provide prescription drug coverage to its enrollees, arguing that the state will get better deals from drug companies by leveraging its purchasing power.
That December, California signed a competitive $302 million contract with the Magellan Medicaid Administration, a subsidiary of Magellan Health, to ensure Medi-Cal enrollees had access to the drugs California would buy in bulk. Magellan provides pharmacy services to public health programs in 28 states and the District of Columbia.
Although Magellan’s biggest moneymaker is mental health insurance, it met a key requirement of the state’s tender: It did not provide health coverage for any Medicaid program participants in California.
Magellan was supposed to take over the drug program in April 2021. But on January 4 of that year, Centene, which was seeking a bigger role in the lucrative behavioral health market, announced plans to buy Magellan.
However, St. Louis-based Centene is one of the largest Medi-Cal insurers in the state, a factor that would disqualify it from bidding on the original contract. Centene provides approx. 1.7 million low-income Californians It operates in 26 counties through its subsidiaries Health Net and California Health & Wellness. In 2019, 11% of the company’s revenue came from its California operations, according to its data. 2021 Annual Report Filed with the U.S. Securities and Exchange Commission.
But the government went to great lengths to make it work, delaying the program, while Magellan installed firewalls to isolate its operations from Centene and paid for third-party monitors.
State regulator reviewed merger in 30 minutes public hearing October 2021. They made no mention of Centene’s legal settlements with other states.
The state Department of Managed Health Care approved the merger on Dec. 30. Two days later, the state launched a new prescription drug program, controlled by Magellan.
Centene’s legal issues
In the past 10 months, Centene has settled with nine states accusing it and its pharmacy business, Envolve, of overcharging Medicaid for prescription drugs and services: it has agreed with Arkansas, Illinois, Kansas, Mississippi, New Hampshire The state and Ohio reached a settlement, according to a press release from those states’ attorneys general. The other three have yet to be identified by Centene or the states themselves.
According to it, the company has set aside $1.25 billion for these settlements and future lawsuits. Report to SEC in 2021.
Centene has deny wrongdoing In a public statement, KHN did not respond to multiple interview requests or emailed questions. Magellan also did not respond to interview requests.
From the outset, other California health insurers opposed the state takeover of the Medi-Cal drug program, in part because it took away a business. They were even more angry when the state allowed one of their biggest rivals to seize power — especially given its legal entanglements.
The state Department of Health Care Services, which administers Medi-Cal, admitted to KHN in March that it was investigating the company, but declined to provide specifics. The state is investigating Centene’s role in providing pharmacy benefits before the state took over from managed care insurers.
“DHCS takes all allegations of fraud, waste and abuse seriously and investigates allegations where necessary,” department spokesman Anthony Cava said in a statement.
For sale soon?
When Medi-Cal Rx debuts Jan. 1, thousands of Californians can’t be added Critical — and sometimes life-saving — medication for days or weeks. Doctors, pharmacists and patients seeking help were often put on hold for up to eight hours.
Magellan blamed staffing shortages during the covid-19 omicron surge and lack of patient data in insurance plans for the problems.State health officials pull out all the stops Solve the problem And appeared before the Legislative Council to assure lawmakers that the contractor would not be paid in full.
But Medi-Cal patients still face uncertainty.
Reports surfaced shortly after Magellan took over California’s Medi-Cal drug program Love News and other publications Centene may sell Magellan’s pharmacy business.
Centene officials have not confirmed the sale. But it would be in line with the company’s recent moves to restructure its pharmacy business in the face of state investigation — such as seeking an outside company to start managing its drug spending.
“Once you tell PBMs they actually have to do well, there’s no more money. It’s time to go,” said Antonio Ciaccia, president of drug pricing regulator 3 Axis Advisors, referring to what has been called the Pharmacy Benefits Manager.
Another ownership change in California’s drug program could create more disruption for the state’s most vulnerable residents, some of whom still struggle to access medicines and specialty medical supplies after Magellan’s tough takeover.
“I don’t know what kind of instability is going on internally when there’s such a drastic change,” said Linnea Koopmans, chief executive of the California Local Health Plan, which represents the state’s public Medicaid insurer that competes with Centene. “It’s just an open question.”
Koopmans and other Centene critics acknowledge that California has long relied on private insurance plans to provide Medi-Cal enrollees with medical and prescription drug coverage, and the state shouldn’t be surprised by the change in ownership brought on by the consolidation of the health care industry. Centene, for example, has a history of taking over California contracts after acquisitions — it did so at the time of acquisition. buy health net 2016.
But consumer advocates say the Centene fiasco makes clear that if the state chooses to hand over responsibility for public programs, it must strengthen its oversight of corporate mergers.
“In an ideal world, it’s all behind-the-scenes conspiracy that people won’t notice — until they notice, until something goes wrong,” said Anthony Wright, executive director of consumer advocacy group Health Access California. “It just increases the need to make sure there is oversight and accountability.”
This story is made by KHNrelease California Healthlineeditorial independent service California Healthcare Foundation.
KHN (Kaiser Health News) is a national newsroom that provides in-depth news coverage on health issues.Along with policy analysis and polling, KHN is one of the top three operating programs in the U.S. KFC (Kaiser Family Foundation). KFF is a donating non-profit organization that provides information on health issues to the state.
Photo: zimmytws, Getty Images
