South Carolina latest state to settle in Medicaid scandal that started in Ohio

The Palmetto State is at least the 17th to settle claims that health care giant Centene overcharged it for drugs that were dispensed as part of the state’s Medicaid program. The settlements all followed a 2021 lawsuit filed in Ohio accusing St. Louis-based Centene of using layers of pharmacy middlemen to hide its overcharges.

South Carolina Attorney General Alan Wilson announced the settlement on Dec. 29. Centene didn’t admit wrongdoing, but it agreed to pay $26 million.

Centene is the largest Medicaid managed-care provider in the United States, serving 15 million patients in 31 states. As a managed-care provider, it coordinated care for the poor in each of its client states. 

But starting in 2017, Centene ran into trouble over the practices of two pharmacy benefit managers it owned that were working with Buckeye Health Plan, Centene’s managed-care subsidiary in Ohio. Pharmacy benefit managers serve as middlemen in drug transactions; they bill states, they reconcile claims and reimburse pharmacies that dispense drugs.

Ohio Attorney General Dave Yost’s investigation followed reporting in 2018 by The Columbus Dispatch.  It found that Buckeye paid Envolve, its pharmacy benefit manager, $321 million for drugs, while Envolve passed along only $301 million of that to CVS Caremark, another PBM, which passed along only $268 million of that to the pharmacies that had actually purchased and dispensed the drugs. 

After his investigation, Yost sued Centene, accusing the company of seeking reimbursement for expenses that had already been paid by third parties, failure to disclose discounts it had received, and artificially inflating dispensing fees at the pharmacy counter.

In June of 2021 — just three months after the suit was filed — Yost and Centene announced a settlement agreement that would pay Ohio $88.3 million. Centene also announced that it was setting aside more than $1 billion to settle similar claims with as many as 20 more states.

As might be expected, the largest states have gotten the largest settlements. Last February, Centene agreed to pay California $215 million over alleged prescription overcharging. And in 2022, the company agreed to pay Texas $166 million.

Despite the fact that it’s paid out hundreds of millions to settle claims that it defrauded so many states, most continue to pay Centene billions to help administer their Medicaid programs. However, the health giant in 2021 announced that it would sell off its pharmacy benefit managers.

While a huge chunk of Centene’s business comes in the form of taxpayer funds intended for the poor, it’s quite lucrative for its top executives. Sarah London was paid $13.2 million a year after being named CEO in 2022. That’s more than 330 times the maximum household income for a family of four to qualify for Medicaid in Ohio.