(The Center Square) — Louisiana Attorney General Jeff Landry is suing UnitedHealth Group Inc., the state’s Medicaid administrator, over an alleged scheme to inflate prescription drug costs by billions of dollars.
Landry filed the lawsuit against United and its pharmacy benefit manager, Optum Rx, last week in East Baton Rouge Parish “to recover billions of dollars in inflated prescription drug prices charged by the defendants to the Louisiana Medicaid program.”
United Healthcare, a subsidiary of UnitedHealth Group, is one of several companies hired by the state to administer Medicaid, and its contract requires the company to spend a minimum share of premiums on medical care. The so-called medical-loss ratio (MLR) doesn’t apply to Optum Rx, which Landry accuses of inflating drug costs to help UnitedHealth meet its MLR.
“Since only United is required to abide by the MLR requirement, inflating the drug costs paid to Optum actually helps United meet its MLR but does not create an actual loss to their parent company,” according to the lawsuit. “Inflated payments to Optum are additional profits for United, yet one counted as costs for the purpose of meeting the MLR.”
Landry alleges Optum overcharges the state for generic drugs, profits from charging the state more than it pays pharmacies to fill prescriptions, and recovers money from pharmacies it doesn’t return to the state, Bloomberg reports.
The situation boils down to “unregulated middlemen, cloaked in secrecy, (who) drive up their own profits at the expense of Louisiana citizens,” Landry wrote in an email to the news site.
Landry contends Optum leverages “an unclear web of contracts” with drug manufacturers, health plans and pharmacies, to skim “a share of profits from each entity,” he wrote.
The lawsuit alleges breach of contract, violations of the Louisiana Unfair Trade Practices Act and other violations. Landry is seeking damages, restitution, and penalties, as well as thousands of pages of requested documents the company has refused to provide.
Landry contends in the lawsuit United has refused to provide a final, signed contract with Optum. The company provided records to the attorney general in February, five months after a request for information, and “of the 2,191 pages contained in those 10 documents, 1,816, or 83%, are fully redacted,” the Ohio Capital Journal quoted from the lawsuit.
UnitedHealth denied any wrongdoing in a statement to Bloomberg.
“We believe this lawsuit is without merit and will defend ourselves against these unsupported allegations,” the statement read.
Landry’s lawsuit is among the latest attempts by state authorities to address alleged fraud by pharmacy benefits managers that run Medicaid drug programs.
Last year, Centene Corp. agreed to a $1.1 billion settlement to resolve similar claims of inflating pharmacy costs.
Ohio Attorney General Dave Yost sued OptumRx in 2019 to recover nearly $16 million the company allegedly overcharged the Bureau of Workers’ Compensation. Optum was also accused in 2017 of charging Ohio’s Medicaid program $26 million more for prescription drugs than it paid to pharmacies to dispense them, according to the Ohio Capital Journal.