A state audit of Ohio's Medicaid prescription drug business says there's not nearly enough transparency for state officials to know whether taxpayers are getting their money's worth from the $2.5 billion annual expenditure.

It also raises questions about whether a reimbursement setup dominated by pharmacy giant CVS is driving smaller competitors out of business and reducing Medicaid recipients' access to medicine.

The report, produced by the office of Auditor Dave Yost at the request of state lawmakers, was made public Thursday morning at a meeting of the legislature's Joint Medicaid Oversight Committee.

Yost told lawmakers at the hearing the fundamental question is “What are we getting for our money?”

He emphasized that “the report does not provide an exhaustive look at all parts of the Goldbergian PBM (pharmacy benefit manager) transaction, some of which is hidden from view — the rebates, fees, drug costs.”

Just two days before its release, the Ohio Department of Medicaid announced that it had ordered its managed-care plans to terminate contracts with CVS Caremark and OptumRx that had allowed those pharmacy benefits managers (PBMs) to bill taxpayers over $200 million a year more for Medicaid drugs than they were reimbursing pharmacies. That difference is known as "spread pricing," and many independent and small pharmacies say it's putting them out of business.

"Although this figure may not include all of services performed by a PBM, it suggests Ohio’s current spread may be excessive and warrants the state taking further action to mitigate the impact on the Medicaid program," auditors found.

"In addition, various practices were identified as indications of potential conflicts of interest that could impact pharmacy services in the Medicaid program and other publicly funded health care."

Yost's study confirmed an earlier consultant's report to the Medicaid department that the PBMs had received roughly $225 million in the year, and their price spread was just under 9 percent. The consultant noted that rate was three to six times the standard amount.

The auditor's report said much more information would need to be known to get a full picture of how the these middlemen in the prescription drug chain are profiting.

"While much attention has been focused on the spread, it does not provide a complete picture of pharmacy costs and PBM compensation," the report said.

"There are a number of additional factors that impact PBM revenues and pharmacy reimbursements that were outside of the scope of this report, such as rebates, additional plan fees, and pharmacy fees. The Ohio legislature should take steps to mandate the reporting of additional statistical and financial data that would provide a more complete understanding."

In addition, the report recommends additional auditing of how Medicaid prescription drugs are administered, and an analysis of other methods of handling the business. It also says other links in the prescription-drug chain, such as manufacturers and wholesalers, could be driving up costs as well.

"While this auditor of state report focuses on PBMs, these other sectors of the pharmacy industry could have higher profit margins than PBMs and be a key factor in Medicaid pharmacy costs," it said.

However, the report might bear out some independent pharmacists' complaints that led The Dispatch to undertake its Side Effects investigation, which helped prompt state officials to consider the changes they're making now.

Pharmacists in Ohio and other states said CVS Caremark slashed reimbursements for generic drugs in the fourth quarter of last year and then many got letters from CVS Pharmacy offering to buy them out. The audit, which covers April 2017 through March 2018, confirms the PBM price spread peaked in that quarter.

The report says that generic drugs — those not under patent — were responsible for 93 percent of the $224 million spread gobbled up by CVS and OptumRx last year. It also said that the average, per-prescription spread was slightly higher for independent pharmacies, $5.66, than it was for CVS pharmacies, $5.63.

In addition, the report shows that the average spread for generics jumped 24 percent — to $7.10 — before dropping 9 percent in the first quarter of this year.

At the same time, a lot more independent and small-chain pharmacies — 210 — have closed in Ohio since 2013, the report says. A total of 161 large-chain pharmacies were counted as closed during the same period, but 81 percent of them were Target Pharmacies taken over by CVS and which continued to be operated by the latter company, the report said.

The report cautioned, however, that the Ohio Board of Pharmacy didn't provide data regarding pharmacies that opened, so the closure picture is incomplete.

That seems to be the theme of the report: More information is needed for the state to evaluate one of its costliest programs.

"The state should go beyond monitoring the spread and obtain statistics and financial information that include transactions that occur outside of claims adjudication," it said. "This would give a more accurate picture of actual reimbursement to pharmacies for services rendered."

Dispatch reporter Maya Kaufman contributed to this story.

mschladen@dispatch.com

@martyschladen