Over three years, state auditor Kathy McGuiness said Delaware overpaid by $24.5 million the pharmacy benefit manager (PBM) for state employees' prescription drugs.
“For fiscal years 2018 through 2020, the State of Delaware spent hundreds of millions of dollars on prescription drugs for state employees,” McGuiness said. “But because of questionable and opaque practices and contract terms with its PBM, Delawareans spent more money than was necessary – most of it to line the PBM’s pockets.”
In a report issued this week--Lack of Transparency & Accountability in Drug Pricing Could be Costing Taxpayers Millions--McGuiness examined Express Scripts Inc., Delaware's middleman between insurance companies, pharmacies, and drug manufacturers between the fiscal years 2018 and 2020.
"My team reviewed the state’s contract with ESI and compared pharmacy reimbursement data," McGuiness said. "What we found was that Delaware’s drug inflation rate for 2018-20 was nearly three times the national inflationary rate...That equates to a 20.1 percent increase in total plan costs from 2018 to 2020 alone despite enrollment numbers remaining relatively flat."
Employers engage PBMs to manage prescription drug plans and contain costs by handling negotiations regarding prescription drugs and pricing. The companies generate revenue, McGuiness said in the report, through tax dollars by utilizing practices like " claw-backs, gag clauses, rebate pumping and spread pricing--all of which significantly contribute to the skyrocketing of prescription drug prices."
"My report focuses primarily on the impact of administrative fees and spread pricing to explore how poor contracting wastes state funds. We identified over $104 million of administrative fees alone, and I have significant concerns about the impact these PBM middlemen have on our community," McGuiness said. "For example, my report shines a spotlight on predatory PBM practices that disproportionately affect our small pharmacies, as well as Delaware’s residents and state entities."
CVS Caremark will become the PBM for state employees beginning July 1, 2021.
"As your state auditor, I am committed to protecting taxpayer dollars and improving government for the people of the First State," McGuiness said. "I seek to identify fraud, waste and abuse wherever it occurs to make government work for you."
Read the full report here: