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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


Gold Coast Health Plan (Gold Coast) oversees the provision of health care services to Medi‑Cal beneficiaries in Ventura County, including the provision of pharmacy prescription services. In 2015 Gold Coast developed a request for proposals (RFP) for a new contractor to negotiate with pharmacies and process their prescription reimbursement claims—known as a pharmacy benefits manager (PBM). Gold Coast did a thorough evaluation of the vendors’ responses to this RFP and accurately shared its results with the Ventura County Medi‑Cal Managed Care Commission (commission), which created and governs Gold Coast. However, rather than selecting the applicant that Gold Coast recommended, the commission instead chose OptumRx, Inc. (OptumRx), largely because its prices were lowest. In its first year, OptumRx made some errors that resulted in it overpaying pharmacies, and some independent pharmacies have complained about OptumRx’s low reimbursements. However, we found that the reimbursements align with the State’s goals to achieve efficient and reasonable prescription benefits costs and an independent consultant’s determination that the reimbursements are reasonable. Our audit came to the following conclusions:

The Commission Chose Its Current PBM Primarily to Address Gold Coast’s High Pharmacy Benefits Costs

Gold Coast initiated its RFP process for a new PBM in response to the Department of Health Care Services’ (DHCS) identifying the potential for Gold Coast to achieve reductions in its pharmacy benefits costs in future years based on its assessments of historical costs. According to DHCS, it encourages health plans such as Gold Coast to achieve efficient and reasonable pharmacy benefits costs. Commissioners who voted to award OptumRx the PBM contract believed that OptumRx’s proposal would lower Gold Coast’s pharmacy benefits costs. However, because the commission did not make clear why it chose to award the PBM contract to OptumRx rather than the vendor that Gold Coast recommended, the commission’s selection process lacked transparency.

Gold Coast Could Have Addressed Errors Made by OptumRx Earlier

During its first year as the PBM for Gold Coast, OptumRx made three errors in its processing of pharmacies’ prescription reimbursement claims. These errors resulted in OptumRx overpaying thousands of claims by a total of more than $6 million. Although Gold Coast took steps to better understand the cause of the errors, it delayed formally notifying OptumRx that its performance did not comply with contractual requirements and that it must address the source of the errors. Had Gold Coast taken prompt, formal action to address the first error, it might have prevented the subsequent errors from occurring.

Although OptumRx’s Reimbursements May Be Lower Than Those of Some Comparable Health Plans, They Are Reasonable

Shortly after OptumRx began providing services, a number of representatives of independent pharmacies in Gold Coast’s network expressed concerns about the low reimbursements they were receiving for prescriptions they dispensed to Gold Coast beneficiaries. Some pharmacies reported that these low reimbursements were causing them financial hardship, which could lead them to close their businesses. We found that OptumRx generally reimbursed pharmacies significantly less than comparable plans for a selection of medications; however, this result aligns with DHCS’ encouragement of Gold Coast to achieve efficient and reasonable pharmacy benefits costs. Further, when Gold Coast contracted with a consultant to assess OptumRx’s reimbursements, the consultant concluded that OptumRx’s reimbursements were within market value of the reimbursements for health plans in California and nationwide. Although two pharmacies in Gold Coast’s network have closed since OptumRx began providing services, Gold Coast’s beneficiaries have continued to have access to pharmacies within the time and distance standards set in state law. Taking all of these factors into consideration, we conclude that OptumRx’s reimbursements for the period we reviewed were reasonable.

Other Areas We Reviewed

We assessed potential conflicts of interest associated with Gold Coast’s RFP process for selecting a new PBM and the extent to which Gold Coast considered the best interests of pharmacies during its RFP process. We did not identify any conflicts of interest. Further, although neither federal nor state law required Gold Coast to consider pharmacies’ business and financial interests during the RFP process, Gold Coast stated that it considered pharmacy interests in some instances. Specifically, Gold Coast required vendors to describe their processes for addressing pharmacy complaints and appeals related to prescription reimbursements.

Summary of Recommendations

To ensure that the public clearly understands the commission’s decisions, the commission should report its reasoning for awarding contracts or the legal basis, if any, for choosing not to do so.

To ensure that it addresses any significant performance issues by its contractors in a timely manner, Gold Coast should establish a process to immediately require contractors to take necessary corrective action to resolve issues and ensure that they do not recur.

Agency Comments

Gold Coast did not agree with our first recommendation, asserting that the commission is under no legal obligation to provide more information about its contracting decisions, but it did agree to implement our second recommendation.

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