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Louisiana sues health care company over practices under investigation in Ohio

Legal document says UnitedHealth inflated drugs by “billions”

Ohio Capital Journal


Louisiana is suing health care giant UnitedHealth over several business practices, saying it is seeking “to recover billions of dollars in inflated prescription-drug prices” for the state Medicaid program.


Among its allegations, the state accuses the company of gaming federal oversight reports meant to ensure that at least 85% of the money it gets from taxpayers goes to pay for health care. In Ohio, where United has long been a managed-care provider, the Medicaid department has kept those reports secret at United and other managed-care providers’ request.


Louisiana Attorney General Jeff Landry last week sued UnitedHealth, saying he was bringing the “suit to recover billions of dollars in inflated prescription drug prices charged by the defendants to the Louisiana Medicaid program.”


Minnesota-based UnitedHealth Group is the fifth-largest corporation in the United States by revenue. It’s the largest health insurer in terms of market share and, through moves such as buying doctors’ offices, it’s becoming an ever bigger player in myriad other aspects of health care.


It’s also a big player in Medicaid, the state/federal program for the poor and disabled. Its United Healthcare Community Plans administer Medicaid services in a number of states, including Louisiana and Ohio.


United also owns the nation’s second-largest pharmacy middleman, OptumRx, which contracts with United health plans and managed-care organizations to handle prescription-drug benefits.


Ohio Attorney General Dave Yost in 2019 sued Optum, claiming it overcharged the Bureau of Workers’ Compensation by $16 million, in part by violating the terms of its contract with the state. Also in Ohio, Optum in 2017 worked through opaque transactions to charge the state Medicaid program $26 million more for prescription drugs than it paid the pharmacies that dispensed them.


The Louisiana suit claims United and its corporate sibling, Optum, used a similar lack of transparency to hide profits and violate its United’s contract with Louisiana.

The attorney general said United has been so unforthcoming that it hasn’t even been able to obtain a copy of the final, signed contract between the related companies. Five months after the AG started requesting information, it got a response in February and “of the 2,191 pages contained in those 10 documents, 1,816, or 83%, are fully redacted,” the lawsuit against United says.


It alleges that United and Optum have violated state law and their contract to improperly inflate drug costs and hide rebates and fees they’re collecting from drug manufacturers and pharmacists.


For its part, Optum denies violating the law.


“We are honored to provide pharmacy benefit services to the Louisiana Department of Health’s Medicaid program that deliver access to more affordable prescription medications for consumers and Louisiana taxpayers,” the company said in an emailed statement. “Our services are performed in accordance with state regulations and the department’s requirements outlined in our contract, and we believe this lawsuit is without merit and will defend ourselves against these unsupported allegations.”


Among the bad acts the Louisiana AG is accusing United of: gaming medical-loss ratio — a federally required accounting of how much tax money a Medicaid managed-care provider is spending on health care and how much it’s pocketing in the form of profits and administrative expenses. Typically, states require that at least 85% of the money they give companies such as United be used for health care. In 2019, United’s Louisiana medical loss ratio — or MLR — was 93%, meaning that 93 cents of every dollar it got from the state went to provide health care for its clients.


But the state’s attorney general said United has been using its relationship with Optum to inflate expenses and pretend it’s spending money on health care that is really ending up as profit for the corporation that owns them both.


“Since only United is required to abide by the MLR requirement, inflating the drug costs paid to Optum actually helps United meet its MLR but does not create an actual loss to their parent company,” the Louisiana lawsuit says. “Under this scheme, inflated payments to Optum are additional profit for United, but one counted as costs for purposes of meeting the MLR.”


One way pharmacy middlemen such as Optum might be inflating costs is by taking money from managed-care organizations and paying pharmacies for drugs, but then forcing pharmacies to pay back a portion of the money — and then not reporting it to the managed-care organizations or departments of Medicaid. In other words, they could be secretly using such a mechanism to unduly profit off of taxpayer funds meant to help poor and disabled people.


Yost, the Ohio attorney general, this year has been seeking financial information from the state’s five managed-care organizations in an attempt to see if that’s happening. If it is, it could be a violation of a 2019 state law prohibiting pharmacy middlemen from most forms of clawbacks.


Yost’s office didn’t immediately respond to a request for comment Wednesday.


Maureen Corcoran, Ohio’s Medicaid director, in February told The Columbus Dispatch that so far in her department’s investigation, it had been unable to untangle the issue of middleman clawbacks. Corcoran also seemed ready to forget the matter unless it found something horrible.


Corcoran’s office won’t even share the MLR reports that United and the other care organizations filed with the state. Louisiana and several other states post them on their websites, but Ohio’s Medicaid department refuses to, saying that United and the other contractors claim they contain trade secrets.


There is other information regarding United that Corcoran and her department won’t provide.


Last year, the Medicaid department picked United to be one of six firms to share $22 billion worth of managed-care business.


Mercer, the consultant paid $10 million to facilitate the process, apparently instructed evaluators not to consider that United’s Optum was being sued by the state on claims of fraud. And the Medicaid department has refused to disclose whether United is also a Mercer client. If true, that is potentially a conflict of interest.


Also, state ethics disclosures show that Corcoran has owned at least $1,000 worth of United stock from when she became Medicaid director and at least through 2020. But she didn’t file an affidavit disclosing exactly how much stock she held in the company as she negotiated and signed a huge contract with it last year.


A spokeswoman for the Ohio Medicaid department didn’t immediately respond to a request for comment.

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