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Gold Coast Health Plan
Its Reimbursements to Pharmacies Are Reasonable, but Its Pharmacy Benefits Manager Did Not Always
Process Claims Correctly

Report Number: 2018-124

August 15, 2019

The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814

Dear Governor and Legislative Leaders:

As directed by the Joint Legislative Audit Committee, my office conducted an audit of Gold Coast Health Plan's (Gold Coast) oversight of OptumRx, Inc. (OptumRx), the contractor that Gold Coast chose to serve as its pharmacy benefits manager (PBM). A PBM processes prescription drug claims on behalf of a health plan. This report concludes that Gold Coast could have taken earlier action to address errors made by OptumRx when processing pharmacies’ prescription reimbursement claims. Further, although Gold Coast’s reimbursements may be lower than those of other comparable health plans, they are reasonable and align with the Department of Health Care Services’ (DHCS) encouragement to health plans that they achieve efficient and reasonable pharmacy benefits costs.

OptumRx became Gold Coast’s PBM after Gold Coast issued a July 2015 request for proposals and conducted a thorough review of the proposals it received. Based on that review, Gold Coast recommended a PBM to the Ventura County Medi-Cal Managed Care Commission (commission), which created and oversees Gold Coast. However, the commission instead chose to award the contract to the lowest-scoring vendor, OptumRx. The commission’s decision was largely because OptumRx offered the lowest cost, but the commission did not state publicly its reason for making this decision, which made its selection process lack transparency.

During its first year as Gold Coast’s PBM, OptumRx made three errors in its processing of pharmacies’ prescription reimbursement claims, resulting in its overpayment of thousands of claims by a total of more than $6 million. Although Gold Coast took steps to understand the cause of the errors, it could have taken formal action earlier to address the first error, which may have prevented subsequent errors from occurring.

After OptumRx began providing services, independent pharmacies complained that its reimbursements were too low. We did find that OptumRx’s reimbursements were often significantly less than other comparable health plans; however, these lower amounts align with DHCS’ encouragement to Gold Coast to achieve efficient and reasonable pharmacy benefits costs. Gold Coast also contracted with a consultant to assess OptumRx’s reimbursements, and the consultant found that OptumRx’s reimbursements were within market value of health plans in California and nationwide. Finally, Gold Coast has maintained a network of pharmacies that provide its beneficiaries with access to pharmacy services within 10 miles or 30 minutes from their places of residence, as required by state law. Taking these factors into consideration, we conclude that OptumRx’s reimbursements were reasonable for the period we reviewed.

Respectfully submitted,

California State Auditor

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