Centene Corp. will pay a combined $143 million to Ohio and Mississippi to settle allegations that the St. Louis-based insurer overcharged states' Medicaid departments for drugs.
The company will also reserve $1.1 billion for future settlements related to its Envolve pharmacy benefit manager, which it has now restructured to serve solely as a third-party administrator to process customer claims. A Centene spokesperson declined to provide information about other investigations currently pending against the payer's pharmacy benefit manager.
The settlement will benefit, at least in part, a group of plaintiffs represented by the Liston & Deas and Cohen & Milstein law firm, which reportedly is consulting at least four other states about their pharmacy benefit manager programs.
Under these agreements, Centene will pay $88 million to Ohio and $55 million to Mississippi. The Ohio Attorney General has dismissed the lawsuit against the company. The settlement does not represent an admission of guilt by Centene. Attorneys General from Ohio and Mississippi did not immediately respond to interview requests.
"We respect the deep and critically important relationships we have with our state partners," Brent Layton, president of health plans, markets and products at Centene, 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."
The settlement relates to the company's pharmacy benefit operations in 2017 and 2018. Centene said it restructured Envolve's operations in 2019 and on Monday announced it will now no longer operate as a pharmacy benefit manager.
In early March, Ohio Attorney General Dave Yost sued Centene, alleging the St. Louis-based insurer used a "web of subcontractors" to obscure drug costs and overcharge the state's Medicaid program by millions of dollars in pharmacy benefits. Centene countered that Yost lacked a "basic understanding" of the state's $26 billion Medicaid program, claiming he wasted taxpayer time and money by accusing the corporation of overcharging for drugs. The lawsuit came at a critical time for the insurer—Ohio recently awarded new contracts for its Medicaid managed-care program, and the state's Medicaid agency deferred its decision about Centene's bid due to the investigation.
Ohio will move to operate its own pharmacy benefit manager, which it claims will save $240 million in Medicaid drug costs.
In April, the Mississippi's attorney general launched an investigation into the insurer's pharmacy benefit management practices for allegedly misleading the state's Medicaid program about drug costs, which resulted in overpayments. Centene, for its part, called the claims "unfounded," adding that the company is "committed to the highest levels of quality and transparency." The insurer said that Mississippi officials reviewed the pharmacy contracts before they went into effect and that Centene's services saved taxpayers millions of dollars compared to market-based drug pricing.
The settlement comes as enrollment in Medicaid grows. At the end of Centene's most recent quarter on March 31, the company reported 13.8 million Medicaid members, a more than 2 million enrollee increase from 11.8 million counted during the same time the year before. The insurer generated $20.1 billion from this line up of business, up 16% from 2020. Centene said states are more interested in contracting out their Medicaid program operations.
"We continue to have active dialogues with our state partners," the company wrote in its most recent earnings filing with the Securities and Exchange Commission.
At the same time as more states partner with third-parties to manage the health of their Medicaid enrollees, more states have begun to question the work of pharmacy benefit managers, which typically work to manage benefits and negotiate drug pricing with pharmaceutical companies and drugstores for government agencies. Like Centene, many large health plans operate their own PBM as a way to control drug costs—UnitedHealthcare, Cigna and CVS all house their own PBMs. CVS owns the Aetna insurer.
In May, CVS was hit with a suit from seven insurers, accusing the company of scheming with pharmacy benefit managers to overcharge health plans for generic drugs. This suit represents one of at least six related complaints against CVS. UnitedHealthcare has been hit with at least one suit over its pharmacy benefit manager operations too, with Ohio seeking to recoup at least $16 million in what it says it overpaid the insurer for drugs.
Georgia, Arkansas, Kansas and New Mexico have all also contracted with Liston & Deas and Cohen & Milstein to investigate their pharmacy benefit managers, according to the Wall Street Journal. A partner at the law firm told the newspaper that the number of states working with its practice is "certainly growing." Liston & Deas and Cohen & Milstein did not immediately respond to an interview request.