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As Medicaid officials investigate whether pharmacy middlemen are ripping off taxpayers by manipulating drug prices in the insurance program covering 3 million poor Ohioans, the Ohio Dispatch reports that another state agency recently found it overpaid millions under a similar arrangement.

“We thought we had a solid contract that kept us from being taken advantage of (but) discovered we were being hosed,” said John Hanna, former pharmacy program manager for the Ohio Bureau of Workers’ Compensation.

“I’ve been a pharmacist since 1977 and I was stunned when I saw the level of manipulation that went on that I didn’t know about,” said Hanna, who retired last September after eight years.

After nearly a year of investigating, Ohio is taking its first steps to recover money from pharmacy middlemen who do billions of dollars worth of business with state agencies. The bureau spent about $86 million last year on pharmacy claims for about 41,000 injured workers.

Attorney General Dave Yost announced Tuesday that he is seeking repayment of nearly $16 million paid to pharmacy-benefit manager OptumRx by the Bureau of Workers’ Compensation. Yost intends to take OptumRx to nonbinding mediation, saying the company has overcharged the bureau since 2015. Such mediation is required under the contract between the bureau and OptumRx. If it fails, the dispute presumably will be taken to court.

“The state of Ohio and the BWC consider these matters of public significance and have calculated the following overcharges attributable to OptumRx’s failure to adhere to agreed discounts on generic drugs. …” says a copy of Yost’s Feb. 11 letter to OptumRx that was obtained by The Dispatch.

The firm that conducted the analysis, Healthplan Data Solutions, determined that OptumRx overcharged BWC by $5.7 million in 2017. That’s 6.5 percent of the $86 million in total agency spending on prescription drugs that year. The bureau fired OptumRx as a consequence of the analysis.

The bureau’s analysis, conducted by the Columbus-based Healthplan Data Solutions, found the private company hired by the bureau to run its pharmacy program overcharged the agency $5.6 million in 2017.

As described by Hanna, workers’ comp was paying pharmacists less to fill prescriptions than they were charging the state, allowing them to pocket millions.

In industry jargon, the practice is known as “spread pricing.” Serious questions about are being raised about it in Iowa, Kentucky, Arkansas and nationally

Hanna said “PBMs started in ’80s to process prescriptions and they slowly grew in the marketplace and realized they had the ability to control pricing and reimbursements. That’s where the concept of the spread came in – you’re my client and I tell you I will process prescriptions for you for your prescription drug plan for X dollars, and then I go to the pharmacies and tell them I will pay you X minus $9 and that’s my spread.”

“The client has no idea what the pharmacy is being paid unless they have a transparent contract.”.