State Auditor To Investigate Drug Industry Middlemen Practices In Iowa Medicaid

May 3, 2019

State Auditor Rob Sand announced Thursday he will investigate prescription drug industry middlemen to find out if they are overcharging Iowa’s Medicaid program.

The Iowa House of Representatives in April unanimously approved a provision directing the Iowa Department of Human Services to look into pharmacy benefit managers’ billing practices in Iowa Medicaid. But the Senate rejected that proposal before lawmakers left the statehouse for the year.

“I think the House was on the right track, and we’re going to make sure that work gets done to protect taxpayer dollars,” said Sand, a Democrat.

Pharmacy benefit managers often keep a cut of drug rebates instead of passing all of the savings along to their clients, which include public entities like Medicaid.

Sand said a preliminary review by Rep. John Forbes, D-Urbandale, at Forbes’ own pharmacy “showed some pretty alarming figures.”

In April, Rep. Joel Fry, R-Osceola, said “there was enough there” in Forbes’ review that he supports looking into the issue.

“We look forward to the opportunity to make sure that the payments [Forbes] is suggesting are off—that we understand those better and figure out if we need to do something there for oversight,” Fry said at the time.

That provision did not make it into the Senate Republicans’ version of the health and human services budget that was ultimately sent to the governor for her signature.

Sen. Mark Costello, R-Imogene, said Iowa Medicaid Director Mike Randol does not think the program has a problem with pharmacy benefit managers.

“I did look into that. I took it seriously. I talked to a lot of people about it,” Costello said. “And I just really don’t think that audit is necessary.”

Forbes disagreed and said the numbers in his preliminary review came from Iowa Medicaid.

“My guess with filling 4 million prescriptions per year in the state of Iowa, this audit would’ve probably recovered somewhere around $10 million. And that’s on the conservative side,” Forbes said at the time.

The state of Ohio conducted a similar review and found pharmacy benefit managers overcharged its Medicaid program by about $220 million.

The U.S. Congress has also scrutinized pharmacy benefit managers as a possible reason for rising drug prices.

“I think as each state digs in, you get a clearer picture of whether this is an isolated problem or more widespread,” Sand said. “And so I think the more we can learn about that in any particular state, the better.”

Sand did not say when his office’s investigation will be completed.

Although lawmakers failed to pass the provision requesting an audit, they did send a bill to the governor that aims to increase transparency in pharmacy benefit managers’ billing practices.