Much of our previous state Medicaid program drug pricing work has been concentrated on diagnosing and sizing a largely overlooked practice called “spread pricing.” The tactic, typically deployed by pharmacy benefit managers (PBMs), involves a PBM paying a pharmacy one price for the dispensing of a prescription, billing a different rate back to a plan sponsor, and pocketing the difference as a spread. As this massive cost-driver is eliminated from state Medicaid programs across the country, 3 Axis Advisors was asked to analyze 350+ million claims worth of pharmacy data in the Florida Medicaid program to assess spread’s influence on the state’s drug costs. Our analysis found very little spread pricing in the program up until 2019, where it appeared to be all but eliminated. However, in our research, we found a slew of other perplexing practices embedded in the prescription drug supply chain that highlight several warped incentives, pricing distortions, and conflicts of interest that stand to drive up costs and compromise robust provider access. As spread pricing is eliminated from more state programs, this report highlights how PBMs and MCOs pivot their pricing and management of pharmacy benefits in a post-spread world.
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