Medicaid giant settles with fifth state

MM Curator summary

[ MM Curator Summary]: KS will get $27.6M out of the $1.1B pot Centene has set aside to deal with PDM spread pricing allegations.


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Investigations originated in Ohio


Centene Michael Neidorff, Chairman and CEO. Despite recent scandals involving the company, Neidorff says profits are the top priority. (DoD Photo by U.S. Army Sgt. James K. McCann, Wikimedia commons).

Centene, the nation’s largest Medicaid managed-care provider, has settled fraud allegations with a fifth state, Kansas Attorney General Derek Schmidt announced Monday.

The $27.6 million Kansas settlement comes after Mississippi, Illinois and Arkansas announced settlements totaling $154 million. All of those follow a settlement with Ohio — the only state to actually sue the company — of $88.3 million

At the time it announced the Ohio settlement, Centene said it was setting aside $1.1 billion to settle such claims with 22 states.

In a statement, the Kansas Attorney General’s office said Centene had shirked its duty to protect taxpayers.

“In general, Schmidt accused the company of failing to satisfy its obligation to represent the state’s best interests in negotiations with other companies that supply drugs to the state Medicaid program,” the statement said.

It added that Schmidt’s office started investigating pharmacy middlemen known as pharmacy benefit managers, or PBMs, after investigations by Ohio Attorney General Dave Yost became public in 2019. Yost has been investigating the middlemen on several fronts and currently is suing two — Express Scripts and OptumRx — on allegations that they defrauded the Ohio Highway Patrol Retirement System and the Ohio Bureau of Workers Compensation, respectively.

Among their duties, PBMs reimburse pharmacies for drugs, and Yost’s lawsuits accuse the companies of not living up to such contractual obligations as passing along discounts as well as overcharging in other ways.

Centene’s main business is as a managed-care provider, meaning that it acts as an insurance company on behalf of such government programs as Medicaid, which serves the poor and disabled, and Medicare, which serves Americans over 65. But it also has PBMs of its own.

Yost’s Ohio investigation of Centene was announced after The Columbus Dispatch in 2018 revealed that Centene’s managed-care plan used its own PBM in conjunction with CVS Caremark and appeared to bill taxpayers $20 million for duplicate services in 2017. CVS initially said it provided the services Centene’s PBM supposedly was providing, but later said it and Centene provided distinct services that fell into the same categories.

On June 16 — two days after announcing settlements with Ohio and Mississippi — Centene held a virtual investor day. During it, Michael Neidorff, the company’s $25 million-a-year CEO, stressed that the company admitted no wrongdoing and he added that his No. 1 and No. 2 priorities were to grow profits.

Discussing what he hoped investors would take away from the event, Neidorff said, “First, our absolute priority moving forward is margin expansion to 4% pre-tax and no less than 3.3% adjusted net income on a sustainable basis. Secondly, margin expansion.”

In response to press coverage, the company later issued a statement attempting to walk that statement back. 

“It is not accurate to say that Michael Neidorff indicated that profits are a higher priority than providing quality care to the members we serve and being a good steward of taxpayer dollars,” it said.

Centene didn’t immediately respond Tuesday when asked why, if it did nothing wrong, the company was prepared to pay out more than $1 billion to settle fraud claims. The company also didn’t respond when asked, if Centene was unwilling to be transparent about that issue, it should be trusted with billions of taxpayer dollars.

At least among Ohio Medicaid officials, Centene retains that trust. The company was one of six to be awarded part of $22 worth of managed-care business starting next year. Also receiving a contract was a UnitedHealth subsidiary even though that company’s PBM is still being sued by Yost.

In court, Medicaid officials conceded that the procurement didn’t consider past allegations of wrongdoing against the applicants.

There may have been some consequence of the actions by the attorneys general, however. It’s unclear whether the move is related to this year’s settlements, but Centene — the nation’s 24th largest corporation by revenue — in late October announced that it was getting out of the PBM business.

Meanwhile, investigations into the practices of pharmacy middlemen are ongoing.

Yost, the Ohio AG, has a team dedicated to investigating such companies. Schmidt, his Kansas counterpart, is doing something similar.

“We take seriously our role of protecting Kansas taxpayers and finding and stopping fraud and overpayments in the state Medicaid program,” he said in a statement. “Today’s settlement involving PBM practices is the first of its sort in Kansas, and other investigations continue.”

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