Have we really fixed anything at all?

So thanks to Ohio, we are all now a bit smarter about spread. But as is often the case with our “random walk” work and writing, we didn’t end up where we expected when we set out to analyze Ohio’s Q3 2018 State Utilization Data. We didn’t expect that this report would be less about the drugs that experienced a large drop in unit cost and more about the drugs that did not experience a change in cost. And we certainly didn’t expect that by studying the drugs that didn’t change in cost, we would end up highlighting some disturbing examples of the conflicts of interest that we are going to have to contend with more and more as the drug supply chain continues to vertically integrate. But that’s data analytics for you – the data will take you to some interesting places that we certainly are not smart enough to forecast.

One thing that’s easy to forecast is that this supply chain is not going to provide the sort of transparency we need without putting up a fight. Consider Ohio’s reporting change. We now have “transparency” into what pharmacies are getting paid in Ohio, but that just means that we have no idea what PBMs are taking in administrative fees. At least before the data reporting change, we could use State Utilization Data and NADAC to calculate the full markup (including both PBM and pharmacy margin) on any given generic drug. Now, at least for Ohio, all we’ll be able to calculate is the pharmacy margin over NADAC. Where did the PBM revenue go? Back to the shadows… expunged from what we would argue is the most helpful public data source available to assess detailed Medicaid drug spending.

Long story short, selective transparency is not going to work, at least not for a supply chain that is so shrouded in secrecy today. As we see here, making a change to bring transparency to one thing just buried something else even deeper. This isn’t going to get us where we need to go. Ultimately, the goal here is to spur healthy competition up and down this overly-secretive supply chain – from manufacturers to PBMs to pharmacies. How can that ever be done without knowing what each part of the supply chain charges for their services and/or products?