Centene Negotiates with California on Alleged Inflated Medicaid Drug Costs

Centene Corp. agreed to pay California more than $215 million in response to allegations that it had overcharged the state’s pharmacy services.

The agreement, which was announced on Wednesday, makes California at least the 17th state to settle pharmacy payment claims totaling $939 million with the St. Louis-based insurance giant. Centene reported $144.5 billion in revenue in 2022, up 15% from the previous year.

State Department of Justice investigators found that Centene subsidiaries reported inflated drug costs and fees for providing prescription drugs to patients in Medi-Cal, the state’s Medicaid insurance program for people with low incomes and disabilities, from January 2017 to December 2018.

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“When companies overburden the Medi-Cal system, it drains valuable resources from people who rely on that help,” Attorney General Rob Bonta, Democrat, said in a statement.

As with previous calculations, Centene denies wrongdoing. In California, the insurer operates two subsidiaries, California Health & Wellness and Health Net, which together provide coverage for about 2 million Medi-Cal patients statewide.

“This no-blame agreement reflects the importance we place on addressing their concerns and our ongoing commitment to providing local, simple and transparent healthcare,” Senten said in an emailed statement to KHN.

Most states contract with private insurance companies such as Centene to cover people in their state Medicaid programs, which are jointly paid for by state and federal taxpayers. In many of these states, the insurance company also sells prescription drugs through a so-called Pharmacy Benefit Manager, or PBM, to get lower prices. These benefit managers act as intermediaries between drug manufacturers and health insurance companies, and between health insurance plans and pharmacies. Centene provides both of these services in several states.

In California, Bonta said Centene companies used their pharmacy management contracts to save their plans $2.70 per prescription drug application over a two-year period. But Centene and its PBM did not disclose or share these discounts with Medi-Cal.

The $215 million settlement is twice the cost of Centene’s inflated prices, Bonta said.

More than 20 states are investigating or have investigated Centene billing at Medicaid pharmacies. The company has agreed to pay compensation to at least 17 of these states: Arkansas, California, Illinois, Indiana, Iowa, Kansas, Louisiana, Massachusetts, Mississippi, Nebraska, New Hampshire, Nevada, New Mexico, Ohio, Oregon, Texas, and Washington, according to press releases and settlement documents from the attorneys general of those states.

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Centene provides benefits to 15.9 million Medicaid members nationwide.

In California, Centene is a key political player and has spent at least $5 million in lobbying, political donations and other contributions over the past five years, according to a KHN analysis of documents filed with the Secretary of State and the California Commission on Fair Political Practices.

Last year, Centene protested the award of Medi-Cal contracts to the state, which would have significantly reduced its business in the nation’s most populous state. State health officials reversed course after Centene and other insurance companies threatened lawsuits and partially reopened their businesses.

An investigation by KHN last year found that the company, its subsidiaries, its top executives, and their spouses donated more than $26.9 million to public politicians in 33 states, their political parties, and non-profit fundraising groups from January 1, 2015 to On October 4, 2022, the Company focused its donations on states where it was seeking Medicaid contracts and settled allegations of overbilling taxpayers.

California Healthline Senior Correspondent Bernard J. Wolfson contributed to this report.

This story was produced by KHN, which publishes California Healthline, an editorially independent service of the California Health Foundation.