Managed Care Pharmacy Benefit Services – Wellpoint
Learn how the AI-generated research projects were createdOverall Conclusion
The Texas OIG found that the involved entities employed unallowable pricing practices to reduce prescription expenses, and Wellpoint incorrectly reported expenses on FSRs, with scope limitations due to Caremark's restricted access. The report concludes that these practices, including spread pricing via effective rate adjustments, required corrective actions and enhanced oversight by Wellpoint and CarelonRx, and remediation of funds collected through effective rate adjustments to the state; Caremark’s fees and conduct also violated contract terms leading to restitution and system controls improvements.
Source Document
Audit Scope
Texas Medicaid and CHIP pharmacy benefit services during state fiscal years 2020 and 2021 (Sept. 1, 2019 – Aug. 31, 2021)
Key Findings Summary
Caremark employed an unallowable pricing model (effective rate pricing) to reduce prescription expenses, resulting in spread pricing and overstatement of costs to Wellpoint.
Wellpoint, through CarelonRx, employed an effective rate pricing model to reduce final prescription expenses to Caremark, leading to unallowable pricing and potential spread pricing; funds recovered from pharmacies were not passed through to CarelonRx/Wellpoint.
Caremark restricted OIG access to records and systems, limiting ability to conclude on audit objectives.
View the Findings tab to see all 6 findings
AI-Assisted
AI Scope Summary
This audit builds on the objectives of ensuring net reimbursements, accurate reporting, and contract compliance for Texas Medicaid/CHIP pharmacy benefits, and informs future audits by focusing on the effectiveness of PBM oversight, the transparency of pricing models (including effective rates and reconciliations), and the timely reporting of rebates and expenses to HHSC.
AI-Generated Insight
The audit underscores the complexity and opacity of PBM pricing arrangements and the critical need for robust oversight and clear contract provisions to prevent unallowable pricing practices and misreporting of expenses. It also highlights potential retroactivity concerns around reconciliations and evolving HHSC guidance impacting pricing rules for Texas Medicaid and CHIP.
Audit Objectives
Determine whether Wellpoint, CarelonRx, and Caremark had processes and controls in place to ensure payments and reimbursements for managed care pharmacy benefit services were based on net reimbursements to pharmacies, were accurately reported to the state of Texas, and complied with the Uniform Managed Care Contract and other applicable requirements.
Audit Findings (6)
Caremark employed an unallowable pricing model (effective rate pricing) to reduce prescription expenses, resulting in spread pricing and overstatement of costs to Wellpoint.
Wellpoint, through CarelonRx, employed an effective rate pricing model to reduce final prescription expenses to Caremark, leading to unallowable pricing and potential spread pricing; funds recovered from pharmacies were not passed through to CarelonRx/Wellpoint.
Caremark restricted OIG access to records and systems, limiting ability to conclude on audit objectives.
Caremark charged unallowable transaction fees to non-Texas pharmacies processing Texas Medicaid and CHIP claims; these fees were not reported to HHSC and were later refunded.
Wellpoint did not effectively oversee its PBM function, enabling unallowable pricing, inaccurate reporting, and limited oversight of CarelonRx and Caremark.
Wellpoint incorrectly reported expenses on its Financial Statistical Reports (FSRs), including unreported rebates and misreported PBM administrative costs for 2020.
Recommendations (5)
Caremark must exclude Texas Medicaid and CHIP services from prohibited effective rate pricing adjustments, not engage in spread pricing for Texas Medicaid and CHIP, report accurate final prescription expenses to Wellpoint through CarelonRx, and provide HHSC and OIG necessary access to records and systems.
Wellpoint and CarelonRx must exclude Texas Medicaid and CHIP services from effective rate pricing adjustments, ensure PBM does not engage in spread pricing, report accurate final prescription expenses to HHSC, and provide HHSC and OIG necessary access; increase oversight of PBM functions to ensure adherence to Texas Medicaid and CHIP requirements.
Wellpoint and CarelonRx must capture and report accurate Texas Medicaid and CHIP prescription expenses and administrative fees, including rebates and any applicable offsets, and follow HHSC reporting instructions.
Caremark must return unallowable transaction fees to the pharmacies that paid them and ensure it does not directly or indirectly charge pharmacies for any step of the claim adjudication process; Wellpoint and CarelonRx must ensure their PBM does not charge pharmacies for any step of the adjudication process.
Wellpoint and CarelonRx must implement monitoring and controls to prevent PBM overcharges and ensure future compliance; ensure accurate reporting of expenses and rebates; align with HHSC guidance to reporting unallowable practices.