The Value of Collaboration in Addressing the Medication Trends That Shape the Workers' Compensation Industry
Issue: May 2015 |
By Tron Emptage, Chief Clinical Officer, Helios, and
Brian Allen, Vice President of Government Affairs, Helios
Moving Forward Together
More than three million Workers' Compensation claims occur in any given year. Medical costs account for roughly 60% of the overall claim cost; of this amount, pharmacy-related claims expense can represent as much as 20%.1 Suffice it to say, a payer's ability to adjudicate these claims in a cost-effective and appropriate manner is no small task, particularly in light of the various influences challenging our industry. However, collaboration with a pharmacy benefit manager (PBM) can help navigate the path to better outcomes, clinically and financially. A review of some of the prevailing medication trends shaping Workers' Compensation demonstrates this opportunity.
Average Wholesale Price
Through the process of defining an Average Wholesale Price (AWP), each pharmaceutical manufacturer - whether for a brand or generic medication - establishes the market price when a medication receives approval to go to market. A published price, the medication's AWP becomes the pricing benchmark for many pharmacy-related programs, including Medicare Part D, group health plans and buying groups, to name a few. The various Workers' Compensation pharmacy fee schedules rely upon AWP to guide pharmacy reimbursement rates, as do pharmacies and PBMs.
The AWPs of brand and generic medications change often. In 2014, for instance, the overall market experienced a high rate of AWP inflation.
By contrast, according to our recently released Drug Trends Report that analyzed more than 400,000 claims from our book of business, brand AWP inflation decreased slightly compared to last year, moving from 13.3% in 2013 to 12.5% in 2014. Meanwhile, the upward trend of rising generic AWP inflation that largely started in 2013 continued. We saw the AWP for several of the most commonly prescribed generic medications in Workers' Compensation increase significantly in 2014; for example, oxycodoneacetaminophen increased 97%, hydrocodoneacetaminophen increased 16%, oxycodone increased 72%, and morphine sulfate increased 57%. In total, the amount of generic AWP inflation increased tenfold in 2014, moving from 0.7% to 10.0%. As a result, the weighted and combined overall increase in AWP was 11.4%.
While pharmacies and PBMs do not calculate or determine the rise or fall in AWPs, PBMs do manage daily changes for both pharmacies and payers, offering programs to help offset these rising costs. Such programs, similar to the ones described below, can help manage costs while ensuring the Injured Worker gets the right medication at the right time, in the right dosage, for the right duration.
- Strong network capture and enforcement - One way to manage rising pharmaceutical costs is to keep claims in-network. The more prescriptions captured in-network, the greater control a payer can have over both cost and utilization. Capturing prescriptions in-network facilitates application of network discounts, drug utilization review, formularies, and other business rules deliberately designed to achieve better clinical outcomes for the Injured Worker while simultaneously reducing overall pharmacy costs.
- Proactive mail order programs - While not immune to increases in AWP, the use of mail order can effectively reduce overall pharmacy costs by extending days' supply versus the retail equivalent, without sacrificing utilization management.
- Generic dispensing and conversion programs - Despite significant AWP inflation for certain medications, the use of generic medications continued to be a cost-effective alternative to brand equivalents, without detriment to the efficacy of the Injured Workers' medication therapy. Point-of-sale efforts to mandate generic fulfillment consistent with state of jurisdiction requirements, as well as concurrent and retrospective clinical interventions, benefit payers while also assuring the safest, most cost-effective therapy for the Injured Worker.
Significance to Payers - In 2014 Helios achieved up to 98% retail network penetration. This was the result of relationships with every national pharmacy chain and virtually all independent pharmacies,real time, using an integrated proprietary technology platform. This is important for delivering significant cost savings, as well as creating administrative efficiencies while virtually eliminating collection calls and paper bills from third-party billers. Additionally, the data captured through this process fueled our patent-pending clinical analytics program, enabling smarter clinical triage and better decision-making throughout the pharmacy claim.
Significance to Payers - In 2014 the average mail order cost per days' supply was 19.8% less than the average retail equivalent. In addition, the average days' supply for mail order continued to be greater than retail, 59.5 days versus 24.1 days, respectively. This is significant because our data showed that for every 10% shift in retail days' supply over to mail order days' supply, there is a resultant 1.4% reduction in spending.
Significance to Payers - In 2014 our generic utilization improved three points, moving from 76% to 79%. This is important to payers because our data shows that for every 1% increase in generic utilization, payers reap an additional 2.2% in savings.
Workers' Comp Jurisdictional Generic Medication Mandates
Opioid analgesics have a long history of therapeutic use to treat pain, whether acute or chronic, resulting from workplace injuries. A May 2014 study by the Workers' Compensation Research Institute (WCRI) indicated that three out of four Injured Workers receive opioid analgesics for pain relief in most states.2 According to our 2015 Drug Trends Report, in 2014 the percentage of Injured Workers utilizing opioid analgesics decreased from 61.8% to 60.2%. Utilization of opioid analgesics per claim decreased 2.9%, and the morphine equivalent dose (MED) per prescription, as well as MED per claim declined 3.8% and 7.4% respectively. These statistics demonstrate the positive contributions a PBM can make, as well as indicate a seemingly slow change in physician prescribing patterns. This is perhaps in response to the national efforts to reduce prescription opioid misuse and abuse, such as Prescription Drug Monitoring Programs (PDMPs) and Risk Evaluation and Mitigation Strategies (REMS).
In regulatory and legislative affairs, state and federal governments continue to wrestle with the persistent use of opioid analgesics in the United States; policy makers turn to formularies, treatment guidelines and prescribing restrictions as possible resolutions.
- The DEA rescheduled all hydrocodone combination products (HCPs) to Schedule II, with the hope that prescribing physicians would re-evaluate patients and their need for HCPs.
- Mississippi and other states are passing laws and rules to limit dispensing to a fixed number of MEDs.
- New York is one of a number of states to adopt treatment guidelines for chronic pain with defined limits on opioid analgesic prescribing.
- California is currently in the stages of adopting revised Treatment Guidelines for Chronic Pain and use of opioid analgesics.
- Texas, Washington, Ohio and Oklahoma are reducing the use of opioid analgesics in their Workers' Compensation systems by adopting closed formularies or preferred drug lists.
- Several states are bolstering their PDMPs by adding enforcement personnel and by imposing stricter reporting requirements to curb doctor shopping and to identify potential "pill mills."
Significance to Payers - While the downward trend in the utilization of opioid analgesics is positive, stakeholders must continue to monitor and rally support around efforts to reduce misuse and abuse situations without imposing undue administrative burden on the Workers' Compensation system. As conversations and initiatives continue to unfold, the interests of the Injured Worker must remain at the forefront. In doing so, payers improve Injured Worker safety and obtain more control over medication expenses. By collaborating with a PBM, Workers' Compensation payers can put an effective opioid utilization strategy into place that will monitor opioid usage, identify potential concerns of misuse or abuse, and intervene where necessary, providing a path to brighter outcomes for all involved.
Medications dispensed from the physician's office and other non-pharmacy locations continue to present safety concerns for the Injured Worker while increasing costs for payers. Several organizations highlighted this throughout 2014 as they released findings that analyze the influence of physician-dispensed medications. As an example, a study of Workers' Compensation claims in Illinois published in the Journal of Occupational and Environmental Medicine found that medications dispensed by physicians had 39% higher medical costs, 27% higher indemnity costs and 34% higher frequency of lost-time days versus pharmacy-dispensed medications. Additionally, claims with physician-dispensed opioids had 78% higher medical costs, 57% higher indemnity costs and 85% higher frequency of losttime days versus claims with pharmacy-dispensed medications. The study also noticed a threefold increase in the number of prescriptions that were physician-dispensed in comparison to pharmacy-dispensed.3 Similarly, the National Council on Compensation Insurance (NCCI) found that prescriptions dispensed by physicians increased 14% between 2007 and 2011, and that the average cost per claim for physician-dispensed prescriptions grew by approximately 25% in 2008 - and doubled over the next three years.4
On the positive side, in states where reforms occurred, instances of physician-dispensed medications are decreasing. Costs too are falling, yet generally remain higher than their pharmacydispensed equivalents.
- South Carolina - Physician dispensing decreased after reimbursement rules changed, falling from 24% of all prescriptions in the third quarter of 2011 to 10% in the first quarter of 2013. The average prices paid per pill decreased by 33% to 52% for most of the top physician-dispensed medications. However, even with these price reductions, the average prices paid for five of the seven common physiciandispensed drugs remained 27% to 42% higher than pharmacy prices paid for the same medication.5
- Connecticut - Physician dispensing was still common in the two calendar quarters after reforms. Physicians dispensed 35% to 36% of all prescriptions, a slight decrease from 39%. The average price paid per pill decreased by 20% to 67% for each of the nine common physician-dispensed drugs. However, the average price paid for most common physician-dispensed drugs remained 30% to 74% higher than prices paid to pharmacies for the same medications.6
- Georgia - Studies of reforms showed that average prices paid for physiciandispensed prescriptions decreased after rule changes. The average price per pill paid for most medications commonly dispensed by physicians decreased by 25% to 40%. However, average prices per pill remained higher for physiciandispensed over pharmacy - 20% to 40%.7
- Florida - After implementation of House Bill 7095, the percent of Injured Workers receiving strong opioids (Schedule II or III) dispensed by physicians during the first three to six months after injury reduced from 3.5% pre-reform to 0.5% post-reform. After reforms, the percent of patients receiving physiciandispensed other pain medications increased from 23.8% to 26% for NSAIDs and from 9% to 9.8% for weaker, non-banned opioids.8
Other states have recently enacted legislation to help reduce physician dispensing and/or its related high costs, including:
- Pennsylvania passed legislation that limits the period during which a physician can receive reimbursement for dispensing medication to an Injured Worker to 15 days for Schedule II medications and 30 days for all others. The legislation also capped repackaged drug reimbursement based on the AWP of the original manufacturer's product.
- Indiana passed a bill limiting the period a physician can dispense to seven days following the injury.
- Hawaii, North Carolina and Alaska all passed legislation capping reimbursement for repackaged drugs based on the AWP of the original manufacturer's product. Additionally, Kentucky and Kansas adopted rules with similar reimbursement cap language.
Significance to Payers - We encourage payers to participate in the process as legislative and regulatory efforts continue to address the high costs associated with physician dispensed and repackaged medications. While there is a place in Workers' Compensation for physician dispensing, we must assure that Injured Workers receive the safest, most efficacious and cost-effective therapy possible.
The practice of compounding medications is an age-old process used by pharmacists to create personalized medications for patients in need. Although controversial in both Workers' Compensation and group health, there is a valid need for compounded medications. Manufacturers will never be able to produce every medication in every strength and dosage form that a patient may require. Medications may be temporarily unavailable, or the injured person may have an allergy precluding their use of oral medications. However, in recent years, the rising use of compounded medications without supporting medication documentation or evidence of efficacy, is concerning - as are their exorbitant costs. In our study, total spending associated with compounded medications in our book of business increased 36.8% in 2014.
The vast majority of compounded medications seen in workers' compensation are non-sterile topical products. These are generally topical creams and ointments, suppositories, or oral formulations. Topical compounded medications are often prescribed to treat neuropathic pain, or muscle and joint pain. They may contain ingredients from several therapeutic classes (e.g., muscle relaxants, anti-inflammatory agents, analgesics, or anticonvulsants). In addition, topical compounded medications often contain inactive vehicle ingredients, or bases. These bases deliver the active ingredients through the skin. Compounded medications are often used despite the availability of only limited research and few randomized controlled trials. Moreover, because compounded medications are commonly distributed by sources other than the retail pharmacy, there can be a risk of drug interactions and therapeutic duplication. Education of the Injured Worker on how to use the medication, potential side effects, and the risks associated with the use of compounded medications is also sometimes lacking.
This is causing regulators and legislators around the country to look at the issue. Many are exploring rules limiting the use of compounded medications, establishing price controls or fee schedules for compounds, or creating compound guidelines. To date, state regulatory actions include:
- Oklahoma requires pre-authorization for all compounded medications.
- Texas requires pre-authorization for any compound containing an Official Disability Guideline (ODG) non-formulary medication.
- Michigan requires utilization of compounds to be approved only if evidence of their usage meets several medical and scientific-based requirements.
- Georgia limits reimbursement to a maximum of three ingredients.
Mississippi employs a dollar amount threshold per month.
In recent years, state-level agencies have looked into developing Workers' Compensation-specific closed formularies, or approved medication lists, to help control prescription medication costs and utilization - specifically, opioid utilization.
While Texas has seen success in reducing non-formulary "N" drug utilization, with the total number of "N" drug prescriptions falling by 74%, 66% fewer Injured Workers receiving "N" drugs, and the cost to the system for "N" drugs decreasing by 82%, some adjustments to the closed formulary may be needed.9 Analysis of our data shows that formulary rules are permitting "Y" drugs that appear to be unrelated to the workplace injury. Additionally, the data indicates that compounded medications that contain all "Y" drug ingredients may not be receiving sufficient scrutiny prior to approval. These are areas where a PBM can help.
Significance to Payers - The formularies employed by PBMs and a closed formulary are not mutually exclusive. In fact, when they work together, they provide an effective checks and balance system, starting at the prescribing level and continuing on through the dispensing and ultimate use of the prescribed medication. This helps to ensure the Injured Worker receives the right medication at the right time, mitigating the risk of prescription medication misuse and abuse.
Collaboration is Key
Looking ahead, we are hopeful that in 2015 the upward climb of AWP inflation will cease, as we are already starting to see AWP inflation that is more moderate for several of the more commonly used medications. We anticipate utilization of opioid analgesics and MED will continue to decline in response to the industry's multi-prong effort to thwart misuse and abuse. Strategies such as closed formularies, treatment guidelines, PDMPs, urine drug testing and monitoring, individualized medicine and multi-disciplinary care will likely remain in use. We are monitoring the impact of rescheduling HCPs on cost and utilization. The practices of compounding medications and physician dispensing will continue to challenge the industry as stakeholders contemplate the cost, safety, benefit and risk of these in the treatment of pain.
The trends in the Workers' Compensation industry highlight the need for a strong focus on cost containment and proper utilization of pharmacy. PBMs' cost containment and utilization management programs promote safe and effective treatments for the compensable condition(s) associated with the Workers' Compensation claim, while remaining consistent with the business rules of the payer and the regulations applicable to the claim. By collaborating with a PBM, payers can make sure the Injured Worker receives the right medication, in the right dose, at the right time, and for the right duration - a better outcome, for everyone.
Helios is a national provider of workers’ compensation and auto no-fault pharmacy benefit management, ancillary, and settlement solutions. Visit www.HeliosComp.com to learn more.
We appreciate Mr. Emptage and Mr. Allen writing this article for Gen Re.
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