Centene and Envolve: What the Drug Bills Left Out

The Centene Medicaid settlement in Ohio required an $88,289,192 payment to resolve allegations that its pharmacy benefit arrangements concealed discounts, inflated dispensing fees and misrepresented drug costs. Centene announced a $1.1 billion reserve in June 2021 for other state claims, beyond its Ohio and Mississippi settlements.

Centene called the initial deals “no-fault agreements.” We see quite a price for supposedly faultless pharmacy billing. If you worked on Envolve invoices, pharmacy contracts or state reports, you know the question these cases ask: how much reached the pharmacy, and how much did the state think reached it?

Ohio’s June 2021 agreement resolved the state’s case against Centene, Buckeye Health Plan Community Solutions and Envolve Pharmacy Solutions. California later pursued allegations under its False Claims Act.

How a Drug Cost Becomes a Medicaid Payment

In Medicaid managed care, the state pays the health plan a fixed amount for each enrolled member. The plan contracts for pharmacy services, and a pharmacy benefit manager negotiates prices, discounts and pharmacy reimbursement. The state’s payment to the plan and the amount a pharmacy receives are different transactions.

Spread pricing is the difference a PBM retains between what the plan pays it for prescription drugs and what it pays the pharmacy. The Centene allegations reached the reporting around that money: discounts left out, fees classified as drug costs, and amounts charged for payments another insurer had already made.

That reporting affects more than the current bill. The Department of Health and Human Services’ Office of Inspector General explained in its May 2024 review of Medicaid drug-cost data that plans’ reported spending affects future capitation rates. An inflated cost can therefore reach the next rate calculation as well. Taxpayers fund that excess, and it drains money meant for the people who depend on Medicaid for healthcare.

The National Health Law Program’s 2015 A Guide to Oversight, Transparency, and Accountability in Medicaid Managed Care explains why independent review of encounter data matters: states use those records both to measure performance and to set capitation rates. Its criticism of external quality reviews was blunt:

An employee who knows how a paid-amount field was populated can explain what a polished report leaves invisible.

Ohio Alleged Three PBMs Between the Plan and the Pharmacy

Ohio alleged that Buckeye’s pharmacy arrangements placed Envolve, Health Net Pharmacy Solutions and CVS Caremark between the health plan and the pharmacy. Buckeye, Envolve and Health Net Pharmacy Solutions shared Centene as their parent. The complaint alleged that this layered arrangement obscured Buckeye’s true costs from the Ohio Department of Medicaid.

The state traced the arrangement to Centene’s acquisition of Health Net Pharmacy Solutions in March 2016. That brought access to an existing CVS Caremark contract. Envolve then subcontracted to Health Net Pharmacy Solutions, which had already subcontracted the pharmacy work to Caremark. Ohio alleged that an extra corporate layer remained in the billing chain even though the work had been handed on.

The Invoice Above the Invoice

For one week in September 2018, Ohio alleged that Caremark billed Envolve $6,996,247 while Envolve billed Buckeye $7,395,783. The complaint identified a $399,536 markup in that week.

The comparison matters because the state saw reported costs at one end of a chain whose underlying bills sat elsewhere. We would want to know what each charge bought, who approved it and how it entered the state report. The invoice a plan received is only part of that account.

Another Insurer’s Payment on Envolve’s Bill

Ohio also alleged that Envolve charged Buckeye for payments Envolve had never made to pharmacies. The complaint described an invoice variance that Envolve attributed to amounts paid by primary insurance on claims where Medicaid was secondary.

That is a specific reconciliation problem. The payment from another insurer appears in the claim data, while the charge to Buckeye allegedly treats that money as Envolve’s own expense. Someone responsible for other-payer fields, invoice adjustments or reconciliation can see the mismatch at the transaction level.

Discounts Kept Out of the Invoice

The complaint alleged that Caremark paid Envolve a discount on each retail pharmacy claim processed for Buckeye members, but Envolve’s invoices to Buckeye did not disclose that discount. Ohio alleged that this allowed the discount to be retained while Buckeye was charged as though it had not reduced the cost.

The complaint also described a disclosure instruction printed on Caremark’s invoices: discounts had to be fully and accurately reported to government health care programs where required. That makes the invoice useful for more than its totals. It can also show what the recipient was told about reporting the discount.

A Dispensing Fee That Did Not Reach the Dispenser

Ohio alleged that Envolve charged Buckeye a dispensing fee above the fee paid under the Caremark contract, while pharmacies received none of the additional charge. The state also alleged that administrative fees were disguised as dispensing fees, inflating reported medical costs and hiding duplicative administrative charges.

The classification mattered to both capitation calculations and medical loss ratio reporting, which measures how much plan revenue goes toward care. We find the alleged label especially revealing: a dispensing fee whose extra charge never reached the pharmacy doing the dispensing. Quite a label.

California Alleged Savings Were Hidden From Medi-Cal

California alleged that California Health & Wellness and Health Net reported inflated prescription-drug costs from January 2017 through December 2018. According to the California Department of Justice’s announcement, Centene obtained savings through its PBM contracts but failed to disclose or pass the discounted fees on to Medi-Cal.

The state described the settlement as twice the value of the inflated price reporting.

California’s Department of Justice investigated with assistance from the Department of Health Care Services. The Department of Managed Health Care, Department of Insurance and Covered California helped resolve the case. The executed agreement also identifies a whistleblower’s California False Claims Act action and provides for payment in two equal installments.

Centene Medicaid Settlements by State

Washington’s August 24, 2022 announcement separately identified $19 million for the state and an additional $13 million to be paid to the federal government. The state alleged undisclosed discounts and inflated dispensing fees. Its Medicaid Fraud Control Division and Health Care Authority jointly investigated after a whistleblower supplied information about pharmacy costs.

Kansas’s Agreement Exceeded the Headline

Kansas announced nearly $27.6 million, while its executed agreement set the larger obligation shown above.

New Hampshire Settled Above Its Estimated Loss

New Hampshire identified at least a $2.4 million loss from inaccurate cost reporting, then agreed to the much larger settlement above under Centene’s national formula for similar cases.

Florida Directed Money to a Foundation

Florida’s agreement directed $10 million to The Hope Florida Foundation as a donation and $57,048,611 to the Agency for Health Care Administration.

We see a strange remedy for alleged Medicaid overcharges: a donation to a private foundation.

A Payment and a Credit

Iowa’s state-published payment letter reported that Centene paid the first installment on January 27, 2023.

Indiana satisfied a quarter of its settlement amount by crediting an existing medical loss ratio remittance.

Envolve’s Name and Role Changed

Centene said in June 2021 that Envolve would operate as an administrative service provider rather than a PBM. Envolve Pharmacy Solutions was renamed Centene Pharmacy Services between the company’s annual reports for 2021 and 2022. For an insider following a contract or cost-reporting process, the function and the records matter across a change of name.

The Contract Determines the Cost That Must Be Reported

The governing state contract supplies the comparison between what a plan reported and what it owed the program. Texas’s managed-care contract required plan reimbursements to PBMs to reflect final amounts paid to pharmacies for ingredients and dispensing fees, with administrative fees paid separately.

In its May 2021 audit of Superior HealthPlan, Centene’s Texas plan, the Texas Health and Human Services Office of Inspector General identified unreported discount payments and amounts misclassified as third-party recoveries.

The distinction also appears outside pharmacy benefits. In WellCare’s 2012 civil settlement, the company agreed to pay $137.5 million to resolve allegations that included inflated medical expenditures and false encounter data. The recurring issue is the cost account presented to Medicaid. A plan’s internal records can show how that account was built.

What Evidence Is Needed to Prove Fraud?

For a case involving pharmacy-cost reporting, we connect the contract promise, the underlying transaction and the figure sent to the state. The Ohio allegations show why each matters: an invoice markup, a discount absent from the invoice, another insurer’s payment included in a charge, and a fee classified as pharmacy spending.

The useful records sit in different parts of the business. Contracts and amendments show the agreed price and discount terms. PBM invoices and pharmacy payment records show what was charged and paid. Reconciliation work and reporting instructions show how those amounts became encounter data or a medical loss ratio submission. In Medicaid False Claims Act cases, dated instructions and internal discussions can connect the discrepancy to what the people responsible knew.

We work with the person who understands those records to identify the representation that mattered to Medicaid and the decisions behind it. You may know why a field was changed, why a discount disappeared or why the same expense carried different labels inside and outside the company.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know How the Drug Cost Was Reported

If the pharmacy payments you worked with do not match the costs your plan reported, talk with our whistleblower experts about that gap. We build the case with you and bring in Medicaid fraud whistleblower lawyers who understand PBM contracts, discounts and managed-care reporting. From your first account of the discrepancy through the pursuit of a recovery, we stay beside you.