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Oregon should improve oversight of insurers’ prescription drug program managers, auditors say

Other states better protect patients and pharmacies from the practices of pharmacy benefit managers, known as PBMs, auditors found
August 21, 2023
This article has been updated to incorporate additional reporting.

Other states do a better job of protecting patients and pharmacies then Oregon does when it comes to the practices of the large companies that administer health insurers’ prescription drug programs, according to a state audit released Monday.

The companies, known as pharmacy benefit managers, or PBMs, act in ways so complex and secretive that it’s impossible for Oregon officials to get the measure of their value, according to the audit released by the office of Secretary of State LaVonne Griffin-Valade.

The audit found that the benefit managers’ practices penalize independent pharmacists and hurt patients, while leading to indeterminate profit margins.

The audit recommended the Oregon Legislature take further actions to improve oversight, including in the Oregon Health Plan, the state Medicaid program that provides free care to about 1.5 million people.

In 2021, insurers serving the plan paid out $767 million in prescription drug benefits, about 14% of their overall spending.

The state plan, said Audits Director Kip Memmott, “is the largest and most complex government program in Oregon and provides critical health services to more than one million Oregonians. But the lack of transparency in our current system means it’s almost impossible to tell if we’re truly getting the best use of our funds with these PBMs.”

Ian Green, audit manager for the Secretary of State, and auditor Kathy Davis told the Lund Report that secrecy around the companies made the audit a challenge, and one that brought surprises.

For instance, the Oregon Health Plan covers about 70,000 prescriptions for albuterol inhalers for people with asthma. They are necessary care; in fact, for children in particular, they can be life saving, Green said.

But the auditors’ number-crunching of PBM reimbursement rates led to surprising conclusion: On average, pharmacies lost nearly $19 for every albuterol prescription they filled.

“They’re losing money on life-saving prescriptions day after day,” Green said.

And yet the benefit managers pay independent pharmacists even less than that average rate. Reimbursements on different drugs were all over the place, often hurting the independent pharmacies still serving many rural areas. Many PBMs own pharmacies, meaning that in effect they pay themselves higher rates.

The variability in reimbursements, Davis added, “doesn't make any sort of rhyme or reason.”

State low-income plan splits care into regions

The Oregon Health Authority has awarded contracts to 16 different regional insurers, known as coordinated care organizations, to oversee coverage and care.

Between them, they use six pharmacy benefit managers. And different insurers have different preferred drug lists, with guaranteed coverage.

That means people may be covered for their medication in one county, but if they move to a different county, they are not.

The auditors looked at measures in other states, concluding that Oregon lacks transparency measures that are used elsewhere.

They also noted that other states have a coordinated purchasing program to buy medications. Some use a single pharmacy benefit manager to manage their entire Medicaid program’s prescription drug benefit.

The audit called the state’s oversight of the coordinated care organizations “minimal.”

Among their recommendations: 

  • Oregon Health Authority should improve its contracting to ensure PBM oversight.
  • The Legislature should explore putting all drug purchasing in the Oregon Health Plan under one pharmacy benefit manager, as well as a drug purchasing program for the entire state.
  • The Legislature should also require insurers for the Oregon Health Plan to be more transparent about their practices and use a single preferred drug list.