NACDS Urges Reimbursement Reform in Ohio

A key demand was for the Ohio Department of Medicaid (ODM) to set a minimum reimbursement level and dispensing fees for Managed Medicaid, in order to ensure that pharmacies receive adequate reimbursement plans.

The National Association of Chain Drug Stores (NACDS) President and CEO, Steven Anderson, IOM, CAE, has written an open letter to Ohio Medicaid Director Maureen Corcoran, expressing concerns with the state’s current reimbursement rates and methodology, and specifying several areas for improvement.

A key demand was for the Ohio Department of Medicaid (ODM) to set a minimum reimbursement level and dispensing fees for Managed Medicaid, in order to ensure that pharmacies receive adequate reimbursement plans.

In January of 2019, ODM implemented requirements for all pharmacy benefit managers (PBMs), requiring them to use a pass-through model which requires the managed care plans to report the exact amount paid to pharmacists for prescriptions, including the product cost, and dispensing fee. According to the letter, NACDS understands that this model was targeted to end unfair spread pricing practices where state funds paid to plans for prescription drugs were not being reflected in the actual reimbursements.

“However, despite these intentions and efforts, these changes have not fully translated into fair and accurate reimbursement levels for pharmacies,” Anderson said.

Despite efforts such as implementation of the pass-through model and prohibiting of spread pricing, the letter expressed concerns that lack of further changes to reimbursement rates will continue putting an extreme financial burden on pharmacies in the state. In order to remedy these concerns, the letter suggested 3 changes to reimbursement policies.

Setting a Medicaid Rate Floor for Pharmacy

First, the letter recommended a set Medicaid rate floor for pharmacy, which the letter said should be adopted before July 1, 2020 in order to provide quick relief to participating pharmacies. At the very least, according to the letter, this rate should cover the true cost of purchasing and dispensing prescription drugs, and should ensure providers are not paid below the current Medicaid fee-for-service (FFS) rates.

“Establishing the same reimbursement rate floor for pharmacies will increase transparency as well as create a level playing field for all providers, thereby allowing for some financial stability and predictability of reimbursement in these private contracts,” Anderson said.

He added that managed care plans should be required to address pharmacy reimbursement comprehensively and to adopt cost-based professional dispensing fees.

Carving Single PBMs Out of National Pharmacy Contracts

The letter’s second recommendation was for any contracts involving single PBMs to be free of requirements that would result in negative downstream impacts on pharmacy providers and their payments. Requiring carve-outs of pass-through rates from national pharmacy contracts may also achieve greater pricing transparency, according to the letter.

“Carving out reimbursement rates ensures that Ohio is remunerating the true and actual economics for the state,” the letter said. “Therefore, we urge ODM to require PBMs to carve the Medicaid managed care plans for Ohio out of the national pharmacy provider agreements.”

Meeting the 85% Medical Loss Ratio (MLR) Requirements

The letter’s third suggestion was for Ohio to require Medicaid managed care plans to maintain Medical Loss Ratios at or above 85%, in accordance with rules adopted by the Centers for Medicare and Medicaid Services (CMS) in May 2016.

The letter specified that due to excessively low reimbursement rates despite recent efforts to remove spread pricing practices, they question whether ODM is requiring the 85% minimum and are seeking clarification on how medical loss ratios are calculated in Ohio.

Commissioning a Follow-up Study

The final suggestion was for ODM to commission a follow-up study in order to determine whether the switch to pass-through rates provided any savings for the state, and, if so, to seek opportunities to reallocate those savings to provide cost-based dispensing fees to pharmacies.

The letter asked for the study to focus on several topics, including spread amounts as calculated prior to 2019 and broken down by PBM; spend trend year-over-year, broken down by utilization and per prescription trend; comparison to spend trends of key players in consultants’ databases; and spread amounts broken down between adjudicated and reconciled rates.

While Anderson’s letter acknowledged ODM’s previous efforts to reform and ensure transparency and accountability, they concluded that there is much more work to do. Reimbursement provisions should not only be in compliance with federal requirements, but should also seek to ensure patient access to prescription drugs and pharmacy services in Ohio.


Anderson S. RE: Ohio Medicaid Managed Care Pharmacy Reimbursement. NACDS website. Written December 10, 2019. Accessed Jan 7, 2020.

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