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Kansas Investigates Obscure But Powerful Part Of The Drug Supply Chain: Pharmacy Middlemen

Being a middleman in the $1 trillion pharmaceutical industry is big business. The middlemen can even earn more than the drugmakers on prescription drugs.

NPR Kansas City

After concluding that pharmacy middlemen overcharged Medicaid programs by hundreds of millions of dollars, two states landed tens of millions in settlements from one of the wealthiest companies in the country.

That company has since set aside another $1 billion for future potential payouts.

Now Kansas is investigating that same industry — one that claims to drive down drug costs but that profits as prices escalate.

Attorney General Derek Schmidt’s office has hired the lawyers who helped land more than $140 million in settlements for Ohio and Mississippi for alleged overcharges to their Medicaid programs.

Schmidt’s office won’t discuss its work or whether it is specifically exploring if the Kansas Medicaid program got fleeced.

Kansas hasn’t publicly indicated it suspects any overcharges. Nor has it audited its Medicaid drug spending the way a flurry of other states did in recent years.

But the law firm that Schmidt hired — Liston & Deas — represents several states in ongoing settlement negotiations. Schmidt’s office declined to say if Kansas is one of those states. Its contract with Liston says the firm will help Kansas investigate any overcharges and pursue settlement money.

Centene Corp. and its subsidiary, Envolve, which settled with Ohio and Mississippi, didn't respond to a request for comment. But the company has repeatedly denied any wrongdoing in other states.

Centene will pay Ohio $88 million and Mississippi $55 million. It wrote in a federal filing this summer that it has also earmarked more than $1 billion for potential settlements with other states, and is in talks with Liston & Deas.

What’s a pharmacy middleman?

Pharmacy middlemen play an obscure but powerful part in the U.S. drug supply chain. They hold incredible sway over the experiences at the pharmacy counter of people on most kinds of health insurance.

That’s because the middlemen typically choose which drugs (and even which specific brands) get covered by an insurance plan. They also negotiate the prices for those drugs with the pharmacies and effectively decide which pharmacies people can go to.

On the back end, the middlemen — companies the industry refers to as “pharmacy benefit managers” — strike deals with drugmakers that badly want their medications on an insurer’s list. Making the cut is critical, so drugmakers pay hefty rebates.

Theoretically, those rebates go to the health plans to lower what they shelled out for the drugs that people picked up at the pharmacy.

Large pharmacy benefit managers argue their vast size gives them the best leverage to get clients the biggest rebates and best deals on drugs.

But the industry finds itself under increasing scrutiny.

Mounting evidence suggests the middlemen that claim to drive down drug prices actually contribute to Americans paying more than twice what people do in other developed countries. Continue Reading


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