Auditor McGuiness: Time to Reform Pharmacy Benefit Manager’s Oversight of State Employees’ Prescription Drug Plan

DOVER, DEL. – State Auditor Kathy McGuiness today released the following statement regarding proposed regulations for pharmacy benefit managers (PBMs):

“This month, I released a report titled ‘Lack of Transparency & Accountability in Drug Pricing Could be Costing Taxpayers Millions’ that listed the ways poor contracting with Express Scripts Inc. (ESI) cost Delawareans over three times the average drug inflationary rate. My team specifically discussed the financial impact on the State Benefits Office (SBO) and how ESI cost Delaware’s taxpayers over $24.5 million more than they should have paid for state employees’ prescription drugs.

“PBMs would like everyone to believe that legislative limits on their predatory practices would result in higher healthcare costs, but the National Community Pharmacists Association (NCPA) released a report, ‘Controlling PBM Conflicts of Interest Does Not Raise Healthcare Costs,’ that compares premium increases between 2015 and 2019 and notes that:

‘The premium increase in states with licensing authority over PBMs during that period was .3% below the national average, while states without licensing authority saw their premiums increase .4% above the national average.’

“The First State has a tremendous opportunity to have better oversight and administrative practices. Delawareans have already paid more than they should have.

“Failing to take action now continues a concerning trend that leaves Delawareans footing an inflated bill.”

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Contact:
Anna Nuzzolese, Executive Assistant
302-857-3907
Anna.Nuzzolese@delaware.gov


State Auditor McGuiness Demands $24.5M in Overcharges Back From State Employees’ PBM, Express Scripts

DOVER, Del. – State Auditor Kathy McGuiness said today that Express Scripts Inc. should pay back the $24.5 million it overcharged the State of Delaware for its state employees’ prescription drug plan from 2018 through 2020.

“My special report found that Delaware paid three times the average drug inflationary price between 2018 and 2020 for state employee prescriptions,” McGuiness said, referencing her latest special report, “Lack of Transparency & Accountability in Drug Pricing Could be Costing Taxpayers Millions,” which was released Friday.

“While the national drug inflationary rate was 4.7 percent during those three years, Delaware paid a 20.1 percent increase in prescription costs,” she continued. “That’s an abuse of taxpayer dollars that should be returned to Delawareans.”

McGuiness said she was pleased to discover that House Bill 219, which passed the House unanimously Friday afternoon, is a comprehensive bill that addresses at least two of her special report’s recommendations.

“My team has been working on this project for two years,” McGuiness said, “and though we did the math on just one selected area showing how PBMs have taken advantage of Delawareans, it’s nice to know that we independently came to some of the same conclusions as legislators.”

McGuiness added that vague language in the Express Scripts contract with the state allowed the PBM to take advantage of the agreement.

“That’s why one of my report’s recommendations is for independent pharmacy experts to be included in contract negotiations with PBMs – so that they can provide the state’s legal team with expert guidance to ensure a sensible fee structure in the contract,” she said.

McGuiness reminded Delawareans that it is her job as state auditor to look for fraud, waste and abuse of tax dollars, and that she will continue to fight for accountable governance for them.

“I take the trust my constituents statewide have placed in me very seriously,” she said. “Imagine how much good that $24.5 million could do in the First State.”

The PBM special report can be located on the Auditor’s Office website found here.

Learn about the Delaware Auditor’s Office at https://auditor.delaware.gov.

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Contact:

Alaina Sewell, Chief of Staff

302-857-3931

Alaina.Sewell@delaware.gov


State Auditor McGuiness Estimates State Overpaid Its Pharmacy Benefit Manager by $24.5 Million over Three Years

DOVER, Del. – $24.5 million taxpayer dollars.

That’s how much Delaware appears to have overpaid its pharmacy benefit manager (PBM) for state employees’ prescription drugs over a three-year period, State Auditor Kathy McGuiness said today.

“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.”

McGuiness released a new special report, titled “Lack of Transparency & Accountability in Drug Pricing Could be Costing Taxpayers Millions,” that looks at the role of PBMs, who serve as middlemen between insurance companies, pharmacies and prescription drug manufacturers. Due to the time involved in examining the contracts and need for supporting data, the report focuses on the relationship Delaware had with Express Scripts Inc. (ESI) as its contracted PBM for state employees for fiscal years 2018-2020.

“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,” she continued.

PBMs are hired by employers to manage prescription drug plans and are expected to contain costs by negotiating rates for prescription drugs with drug makers and pharmacies.

“My report focuses primarily on the impact of administrative fees and spread pricing to explore how poor contracting wastes state funds,” McGuiness said. “We identified over $104 million of administrative fees alone, and I have significant concerns about the impact these PBM middlemen have on our community.

“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.”

The 15-page report also details the controversy surrounding how these organizations generate revenue from tax dollars by using practices such as claw-backs, gag clauses, rebate pumping and spread pricing – all of which significantly contribute to the skyrocketing of prescription drug prices.

The report contains five observations and five recommendations for how lawmakers can help prevent this kind of wasteful spending in future contracts.

“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.”

As of July 1, 2021, CVS Caremark will become the PBM for state employees.

“Although contract terms with CVS Caremark are already set, I urge lawmakers to review our recommendations and pass legislation that helps our small independent pharmacies, who deal with these Goliath-sized companies that force them to sign take-it-or-leave-it contracts that can put these pharmacies out of business.”

The new special report, “Lack of Transparency & Accountability in Drug Pricing Could be Costing Taxpayers Millions,” can be located on the Auditor’s Office website found here.

 

Learn about the Delaware Auditor’s Office at https://auditor.delaware.gov.

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Editor’s note: Auditor McGuiness, a licensed immunizing pharmacist, owned a small independent pharmacy business in downtown Rehoboth Beach from 1994 to 2002.

 

Contact:

Alaina Sewell, Chief of Staff

302-857-3931


Auditor McGuiness Finds Long-Term Care Facilities Needed Clearer Guidance, Assistance During Early Stages of Pandemic

DOVER, DELAWARE – Delaware’s long-term care facilities, which have been disproportionately affected by the COVID-19 pandemic, needed clearer guidance and assistance from the state during the early stages of the pandemic, State Auditor Kathy McGuiness said today.

“My team reviewed publicly reported COVID-19 data at the state and federal levels, and they surveyed and interviewed long-term care facility administrators,” McGuiness said. “What we learned was that confusing and sometimes conflicting guidance from state and federal officials led those administrators to ask the state many questions – and those imperative questions were often not answered in a timely manner.

In a new special report, titled “Unanswered Questions: Improving Technology, Communications, and Reporting in Long-Term Care Facilities During the Pandemic,” McGuiness highlights three observations about COVID-19 reporting by and communication to the state’s long-term care facilities (LTCFs):

  1. Pandemic information: COVID-19 guidance changed frequently, came from multiple sources, was hard to interpret or was completely absent.
  2. Crisis communications: When faced with difficult situations, LTCFs were unable to contact or receive timely assistance from state health agencies.
  3. Pandemic reporting: Data reported to the federal government did not match data reported through state Department of Health and Social Services (DHSS) news releases; 18 LTCFs were not reporting data to the federal Centers for Medicare & Medicaid Services (CMS).

“Long-term care facility residents are among those most affected by the COVID-19 pandemic,” McGuiness said. “Regardless of whether you look at state or federal data, that much is clear.”

McGuiness pointed out that her team’s research shows that state health officials have worked diligently to provide guidance to LTCFs since the beginning of the pandemic.

“I applaud Delaware’s health officials for their tireless work over the last year to guide Delawareans through this pandemic,” McGuiness said. “This special report is meant to help state health officials see specific areas related to long-term care facilities so they can improve their communication, guidance and data reporting to provide an accurate picture of how these facilities’ residents and staff are being affected.”

To make her determinations, McGuiness directed her team to survey LTCF administrators about the guidance and assistance their facilities received both at the beginning of the pandemic and six months later. The team also reviewed federal and state guidance provided to LTCFs during those time periods, as well as publicly available data on CMS.gov and on Delaware’s official website, news.delaware.gov.

The new special report, which offers six recommendations for improvement, can be found on the Auditor’s Office website here.

Under Delaware Code 2909, the Auditor of Accounts may produce special reports that examine state agencies’ performance and offer recommendations for greater accuracy and efficiency, as well as data, information and recommendations the auditor deems advisable and necessary.

Learn about the Delaware Auditor’s Office at https://auditor.delaware.gov.

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Contact:

Alaina Sewell, Chief of Staff

302-857-3931

Alaina.Sewell@delaware.gov


State Auditor Kathy McGuiness Releases Findings From 2020 Annual Comprehensive Financial Report

State Auditor Kathy McGuiness released the findings from the state’s Fiscal Year 2020 Annual Comprehensive Financial Report (ACFR) earlier this week. The ACFR is a massive, wide-ranging engagement that includes more than 25 separate audits of state agencies and programs, and it plays a large role in helping Delaware maintain its AAA bond rating.

“I am proud to work with state agencies each year to complete this enormous undertaking because that collaboration means government transparency and accountability for all Delawareans so they can see how where their tax dollars are being spent,” McGuiness said.

Read the full report on auditor.delaware.gov.