Health insurance giant Centene Corp. Agreed to pay Texas $165.6 million to resolve claims the state’s Medicaid program overcharged for pharmacy services.
It is the largest known payout by the nation’s largest Medicaid insurer over drug pricing practices. The agreement was signed July 11 but was not publicly announced until Monday, after KHN obtained a copy of the settlement through a Texas public records request and began asking questions.
The agreement makes Texas at least the 12th state to settle pharmacy billing claims with St. Louis-based Centene.
The Sentinel did not respond Monday to multiple requests for comment about the Texas settlement. But it has denied wrongdoing in several settlements, and Centene President and Chief Operating Officer Brent Layton said last year that the settlements in Ohio and Mississippi reflected the company’s “commitment to making healthcare local, simple and transparent” and allowed it to continue. “Relentless focus on delivering high-quality results to our members.”
Most states contract with private insurance companies like Centene to cover people with disabilities or low incomes in their state Medicaid programs, which are jointly paid for by state and federal taxpayers. In many of these states, insurance companies manage Medicaid prescription drugs to get lower prices, called pharmacy benefit managers, or PBMs. These types of benefit managers act as intermediaries between drug manufacturers and health insurers, and between health plans and pharmacies. Centene provides both of these services in multiple states.
Medicaid provided a large launching pad for Centene’s growth and revenue. The company is the nation’s largest Medicaid managed-care insurer, providing health insurance benefits to 15.4 million enrollees nationwide.
Multiple states have filed complaints against Centene’s pharmacy manager business, alleging that it overbilled their Medicaid programs for prescription drugs and pharmacy services. State totals are not publicly known. Centene settled with Arkansas, Illinois, Kansas, Mississippi, New Hampshire, New Mexico, Ohio, Texas and Washington for a total of $475 million, according to news releases and settlement documents from those states’ attorneys general. The other three states and the extent of their settlements were not identified by Sentin or the states themselves.
The company’s first settlement came in 2021 with Ohio and Mississippi. The $88 million Centine agreed to pay Ohio before the deal with Texas was its largest public settlement.
Exactly how the company overcharged states, or failed to meet the terms of its contract, was not disclosed in the settlement, said Joey Mattingly, associate professor at the Maryland School of Pharmacy. “There are many ways you can overcharge Medicaid,” Mattingly said. “It’s pretty amazing that’s the number of these states.”
The Texas settlement is not expected to be Centene’s final PBM payout. In a July filing with the U.S. Securities and Exchange Commission, Centene wrote that “discussions are underway to bring about a final resolution” to drug billing concerns in “other affected states” but did not specify the states. It also allocated $1.25 billion in 2021 to address pharmacy benefit manager settlements.
Among the other states could be California, which is investigating Centene’s role in providing pharmacy benefits to its Medicaid enrollees, KHN first reported in April. Florida and South Carolina signed legal agreements with a Mississippi-based firm, Liston & Dees, which has represented other states, including Texas, in their search for pharmacy facilities in Centene.
Still, the settlement did not end the business relationship. In Ohio and Mississippi, the company renewed original state managed-care contracts after settling pharmacy benefit complaints.
And just last week, Centene announced that it had renewed the contract of the Texas company’s Texas affiliate, Superior Health Plan, to provide health care to foster care children and youth — despite a July settlement over its prescription drug handling. Centene did not disclose financial terms of the new deal.
An undisclosed portion of the Texas prescription drug settlement is expected to go to the federal government because it helps fund Medicaid. Centine’s deal with Texas requires the company to pay half of the settlement amount in August.
Centene likely agreed to pay more in Texas than in Ohio because of the higher number of prescription drug claims, said Antonio Ciacchia, president of 3 Axis Advisors, a consulting firm that worked with Liston & Dees on drug billing issues.
“The outcome we achieved in this case sends a clear message to providers that Texas expects transparency from its Medicaid partners in accordance with Texas law,” Attorney General Ken Paxton said in a statement. The department did not clarify why it did not disclose the settlement earlier.
Pharmacy benefit managers in general have faced increasing scrutiny and criticism. The Federal Trade Commission announced in June that it was launching an investigation into the pharmacy benefit management industry and its impact on consumer access to prescription drugs and drug costs.
“You’re seeing a growing recognition that this is a significant part of the drug affordability problem in our country,” said Erin Trisch, associate professor at the University of Southern California School of Pharmacy. “It’s actually a pretty consolidated and poorly functioning industry that’s been shrouded in obscurity and secrecy for a decade or more now.”
Rebecca Grapevine contributed to this article.
This story was produced by KHN, which publishes California Healthline, the editorially independent service of the California Health Care Foundation.
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