3 Axis Advisors estimates that Michigan Medicaid managed care manages at least $250 million a year in generic drug spending. Michigan’s Managed Care Organizations (MCOs) contract with Pharmacy Benefit Managers (PBMs) to collectively manage these funds. Recently, Ohio and Kentucky have found that the nature of these contracts between MCOs and PBMs result in a dynamic called “spread pricing,” in which the PBM “buys” a drug at a low cost from a pharmacy and “sells” the same drug at some higher cost to the MCO. This project was commissioned by the Michigan Pharmacists Association (MPA) to assess the degree of generic drug spread pricing within Michigan’s Medicaid managed care program.
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