The State of California, under a directive from Governor Gavin Newsom, is “carving out” the pharmacy benefit for Medi-Cal beneficiaries from managed-care plans and transitioning to a fee-for-service (FFS) program, moving 13 million Medi-Cal beneficiaries to a new pharmacy program by January 2021.
The California Department of Health Care Services (DHCS) cites that transitioning pharmacy services from managed care to FFS will standardize the Medi-Cal pharmacy benefit statewide; improve access to pharmacy services with a pharmacy network that includes approximately 97% of the state’s pharmacies; and strengthen California’s ability to negotiate state supplemental drug rebates with drug manufacturers.
In November, DHCS awarded a five-year contract to a subsidiary of Magellan Health to manage its pharmacy benefit services statewide, effective Jan. 1, 2021.
Perry Cohen, CEO of consulting service The Pharmacy Group, recently was at the California Association of Health Plans (CAHP) meeting where he was on a panel to address this issue and says the switch to Magellan all at once will be problematic.
“It’s the wrong way to implement it,” he says. “It’s going to be very disruptive to members and their level of service. For instance, there will be two 800-numbers to call—one for health plans and a second for pharmacy—and they’re going to get confused.”
What it all means
Under managed-care plans, DHCS, which administers Medi-Cal, pays managed care plans capitated payments, a portion of which cover the costs of prescription drugs. These payments are determined by the negotiated prices between the managed care plans and the pharmacies. Medi-cal beneficiaries can only obtain prescription drugs within their managed care plans’ pharmacy network.
Anh Nguyen, assistant professor of economics at Carnegie Mellon University’s Tepper School of Business, explains under the fee-for-service program, DHCS will directly reimburse pharmacies at their actual cost of acquiring prescription drugs (plus other predetermined fees). Additionally, Medi-cal beneficiaries will no longer be dependent on the pharmacy network of the managed care plan and can obtain prescription drugs to almost all pharmacies in California.
Jarrod McNaughton, CEO at Inland Empire Health Plan, headquartered in Rancho Cucamonga, California, notes when the state created Medi-Cal Managed Care Plans, its desire was to fashion a system of care that coordinated benefits for members, providing access to quality providers in a cost-effective manner. The emphasis was on preventive and primary care for the now nearly 11 million Medi-Cal beneficiaries in the state.
“This new direction in Medi-Cal is taking out of the plan responsibility for one of the key elements of care, the pharmacy benefit, and moving its function and operation to the state under a centralized pharmacy benefit manager (PBM),” he says. “What is currently a crucial cornerstone in coordinating care by making sure our members and providers have access to local plan team members to call and ask questions regarding the pharmacy benefit will be moved to a centralized function in Sacramento.”
The activities covered by the new program include claims processing for all outpatient drugs; pharmacy network administration; pharmacy drug rebate administration (both federal and state); prior authorization transactions; drug utilization review; customer service; and health plan coordination activities.
Implications on Medicaid plans
As proposed, McNaughton says local interventions that help ensure members receive their medication when they need it, avoid harmful drug interactions, monitor opioid prescriptions to avoid misuse and overprescribing, and ensure patients are utilizing their medications as prescribed will no longer be managed locally.
“Instead, these responsibilities will be outsourced to a private, for-profit PBM that would be hard-pressed to manage the unique needs and challenges of the Medi-Cal members who reside throughout the Inland Empire region,” he says. “Any delay or denial in access to needed medication will pose serious health risks and pressure on local hospital emergency rooms.”