Centene agrees to $215M settlement with California for alleged Medicaid overbilling

Centene Corp. has agreed to pay more than $215 million to California over allegations it overcharged the state for pharmacy services — the biggest payout to date by the nation’s largest Medicaid insurer over its drug pricing practices.

The agreement announced Wednesday makes California at least the 17th state to settle pharmacy billing 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.

Investigators with the state Department of Justice found that Centene’s subsidiaries reported inflated drug costs and fees in 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.

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

As it has in previous settlements, Centene denied wrongdoing. Within California, the insurer operates two subsidiaries: California Health & Wellness and Health Net, which together provide coverage to around 2 million Medi-Cal patients statewide.

“This no-fault agreement reflects the significance we place on addressing their concerns and our ongoing commitment to making the delivery of healthcare local, simple and transparent,” Centene said in a statement emailed 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 those states, the insurance company also handles prescription medications through what is called a pharmacy benefit manager, or PBM, to get lower prices. Such benefit managers act as intermediaries between drugmakers and health insurers and also between health plans and pharmacies. Centene has provided both those services in multiple states.

In California, Bonta said, Centene’s companies leveraged its pharmacy management contracts to save its plans $2.70 per prescription drug claim over the two-year period. But Centene and its PBM failed to disclose or pass on these discounted fees to Medi-Cal.

The $215 million settlement amounts to twice the value of Centene’s inflated prices, according to Bonta.

More than 20 states are investigating or have investigated Centene’s Medicaid pharmacy billing. The company has agreed to pay settlements to at least 17 of those states: Arkansas, California, Illinois, Indiana, Iowa, Kansas, Louisiana, Massachusetts, Mississippi, Nebraska, New Hampshire, Nevada, New Mexico, Ohio, Oregon, Texas, and Washington, according to news releases and settlement documents from attorneys general in those states. Centene provides benefits to 15.9 million Medicaid enrollees nationwide.

In California, Centene is a key political player and has spent at least $5 million on lobbying, political donations, and other contributions over the last five years, according to a KHN analysis of filings with the secretary of state and California Fair Political Practices Commission.

Last year, Centene protested the state’s Medi-Cal contract awards, which would have significantly cut its business in the nation’s most populous state. State health officials changed course after Centene and other insurers threatened lawsuits and partially restored some of its business.

A KHN investigation last year found that the company, its subsidiaries, its top executives, and their spouses contributed more than $26.9 million to state politicians in 33 states, to their political parties, and to nonprofit fundraising groups from Jan. 1, 2015, through Oct. 4, 2022. The company focused its giving on states where it has been wooing Medicaid contracts and settling accusations that it overbilled taxpayers.