Appendix

Scope and Methodology

The Audit Committee requested that the California State Auditor conduct an audit of Gold Coast to determine whether it was appropriately overseeing its contracted PBM. Also, we assessed the RFP process and the decision the commissioners made to award the contract to OptumRx. In addition, we reviewed DHCS’ oversight of Gold Coast and its PBM, and we evaluated Gold Coast’s role in setting reimbursements to pharmacies. The table below lists the objectives that the Audit Committee approved and the methods we used to address them.

Audit Objectives and the Methods Used to Address Them
AUDIT OBJECTIVE		METHOD
1	Review and evaluate the laws, rules, and regulations significant to the audit objectives.	Reviewed relevant laws, rules, regulations, and Gold Coast’s policies and procedures related to reimbursements to pharmacies and oversight of PBMs.
2	Assess the roles and responsibilities of any relevant state agencies, including DHCS, in overseeing Gold Coast’s responsibilities relating to its contracted PBM.	Determine the extent of DHCS’ oversight by reviewing its audits of Gold Coast and its policies and procedures related to oversight of its PBM.
3	Analyze Gold Coast’s RFP process that led to it awarding a contract in 2016 to OptumRx to manage prescription drug benefits for its members to determine, to the extent possible, the following:
	a. Whether Gold Coast executed its contract with OptumRx with the best interests of its contracted pharmacies and member beneficiaries in mind.	Interviewed Gold Coast about the considerations it made for pharmacies and beneficiaries in its RFP process and reviewed documentation associated with those considerations.
	b. Whether Gold Coast presented the most accurate and relevant information for the commissioners to consider when voting on the contract.	Determine whether Gold Coast presented accurate and relevant information for the commissioners to review during the RFP process by reviewing Gold Coast’s presentation to the commission of the results of the RFP process and the documents the commission considered when making its decision to award the PBM contract to OptumRx. Verified the accuracy of the scores and other information that Gold Coast presented to the commission. Reviewed the scoring criteria in the RFP to determine whether Gold Coast included the most relevant factors, such as network access, and whether those factors were appropriately weighted. Listened to audio recordings and reviewed minutes of the meeting during which the commission selected a PBM. Interviewed the commissioners about why they voted for or against OptumRx to become Gold Coast’s PBM.
4	Determine whether Gold Coast has sufficient oversight procedures in place to ensure that its subcontractor for managing prescription drug benefits complies with laws and regulations relevant to reimbursements to pharmacies.	Identified state laws and regulations applicable to PBMs in relation to reimbursements to pharmacies, including laws requiring PBMs to maintain a process for pharmacies to appeal reimbursements. Interviewed Gold Coast about its oversight of OptumRx’s reimbursement processes and obtained associated documentation. Reviewed reimbursement appeals allowed under state law to determine their volume and compared the number filed with OptumRx to those filed with Gold Coast’s former PBM, Script Care. Ensured that OptumRx responded adequately to pharmacists’ concerns by reviewing the one grievance from a pharmacy that OptumRx received in 2018. This grievance was not related to reimbursements to pharmacies or OptumRx’s performance.
5	Evaluate whether Gold Coast’s policies, practices, and processes for establishing reimbursement rates for contracted pharmacies through its subcontractor are reasonable and appropriate. To the extent they are not reasonable or appropriate, determine what responsibilities, if any, fall on Gold Coast, DHCS, or other state agencies to address the issue.	Reviewed laws and regulations to identify whether any responsibility falls on Gold Coast, DHCS, or other state entities to oversee reimbursements that PBMs pay pharmacies. Interviewed DHCS to determine whether it expects health plans to assess or oversee reimbursements for contracted pharmacies. Interviewed Gold Coast to determine the level of oversight it has over reimbursements to pharmacies.
6	Assess, to the extent possible, how Gold Coast and OptumRx’s reimbursements to contracted pharmacies compare to reimbursements by similarly situated Medi-Cal managed care organizations and their PBMs for similar drugs.	Reviewed Gold Coast’s consultant’s assessment of OptumRx’s reimbursements to identify whether the consultant’s methodology was sound and whether the consultant concluded the reimbursements were reasonable. Reviewed reimbursement claims data that DHCS provided for Gold Coast and three similar health plans for a selection of medications. We selected data from June 2018 to compare OptumRx’s reimbursements to similar health plans’ reimbursements. We used the results of this review to determine whether OptumRx’s reimbursements were higher or lower than those of other plans. Reviewed MAC lists for Gold Coast and four similar health plans for a selection of medications to assess whether OptumRx’s maximum allowable costs are comparable to other health plans.
7	Review and assess any other issues that are significant to the audit.	Reviewed statements of economic interests and conflict-of-interest statements for Gold Coast employees involved in the second and third RFP processes, as well as for the commissioners present when the commission awarded the contract to OptumRx. Determined whether there was any significant impact to services for beneficiaries by obtaining documentation related to the two pharmacy closures reported to have occurred since OptumRx became Gold Coast’s PBM.

Source: Analysis of the Audit Committee’s audit request number 2018-124, as well as information and documentation identified in the table column titled Method.

Assessment of Data Reliability

The U.S. Government Accountability Office, whose standards we are statutorily required to follow, requires us to assess the sufficiency and appropriateness of computer‑processed information that we use to support our findings, conclusions, or recommendations. In performing this audit, we relied on electronic data from June 2018 that DHCS provided from its Management Information System/Decision Support System data warehouse to compare for a selection of medications the reimbursements under Gold Coast to those of other similar health plans that also serve Medi‑Cal beneficiaries. To evaluate these data, we performed logic testing of key data elements, and we interviewed an agency official knowledgeable about the data. Because DHCS’ database uses a paperless system, we were unable to assess the completeness or accuracy of these data. As a result, we found the data to be of undetermined reliability for our purposes. However, to gain some assurance about the reliability of the reimbursement claims data, we compared the reimbursement claims data for selected medications from DHCS to MAC lists of other similar health plans to ensure that the plans’ reimbursements according to the claims data were equal to or less than the amounts identified in the MAC lists. We did not identify any significant issues.

In addition, Gold Coast provided us with data regarding the beneficiary grievances it received from June 2017 through February 2019. We reviewed these data to identify whether Gold Coast received any beneficiary grievances related to access to covered pharmacy services and to assess whether Gold Coast’s responses to the grievances were adequate. Gold Coast also provided its prior authorization review spreadsheets for the period from June 2017 through December 2018. From these data, we reviewed a selection of OptumRx’s decisions on prior authorization requests to assess the adequacy of Gold Coast’s oversight. To evaluate these data, we performed logic testing of key data elements, and we interviewed agency officials knowledgeable about the data. We were unable to complete accuracy or completeness testing on the member grievance data because the system is primarily paperless. We also did not complete accuracy or completeness testing on the prior authorization spreadsheets because the system is primarily paperless and the volume of prior authorizations made these tests cost‑prohibitive. Therefore, for both systems, we found the data to be of undetermined reliability for our audit purposes. Although these determinations may affect the precision of some of the numbers we present, there is sufficient evidence in total to support our findings, conclusions, and recommendations.