From the big big world of national health care reform, we’re heading to the tiny niche of drugs in workers comp, where some pretty interesting things are happening.
Well, interesting to the six or eight people who are remotely interested in WC drug management.
NCCI published their annual review of drugs in comp a bit ago, and I finally got around to reviewing it in detail last night. There’s some really good work here, although it can be a bit confusing.
Take cost containment. In one of their slides, labeled “WC Prescription Drug Cost Containment Options” all of the options are price-related (except one mention of PBMs and one of formularies).
Controlling price does NOT control cost. The formula is
Cost = Price x Utilization, with utilization driven by the types of drugs prescribed and the volume of each type prescribed.
(as an aside, note that drug costs in California have gone up dramatically, despite a fee schedule that is the lowest in the nation)
But the next slide gets into utilization, noting “utilization is the significant driving force behind total cost.” That’s dead on. And it gets better. Further on, NCCI notes that utilization has a much greater impact on total cost, by comparison price is almost inconsequential.
There are also some useful benchmarks and statistics WC execs should look to when evaluating their drug programs. For example:
Generics were prescribed 87% of the time when a brand or generic option was available. Now that’s not to say you should be satisfied with an 87% generic fill rate, but it does give you a floor from which to work.
The older the claim is, the more dollars spent on drugs – 22% of medical expenses for claims in their fifth year are for drugs and that number goes to 36% for twelve year old claims. Implication? the more importance of addressing utilization as early in a claim as possible. If they are getting the wrong drugs early, chances are good they will be getting the wrong drugs for years.
The net is this. Price is not important. Do not select a PBM based on price. Pick the PBM that understands utilization is the issue, understands how to manage utilization, and has programs in place that are clinically-based.
And watch out for those old dog claims!
Good stuff!
Are you planning to see Sicko?
Joe, yes, you and NCCI are “dead on” about network utilization being the biggest driver in reducing work comp Rx costs! Case in point, at Healthesystems, we have replaced PBM’s where their pricing was lower but Rx costs were higher due to poor network utilization. Price DOES NOT equal cost.
Bryan H. Condie
Healthesystems
Bryan – sorry, you missed the point entirely.
It is not NETWORK utilization, it is DRUG utilization – the type and volume of drugs dispensed. If that wasn’t clear in the post mea culpa.
While network penetration is important, it is NOT in the top 5.
Joe Paduda
I too agree that utilization is one of the key drivers in a work comp prescription drug program. This not only includes # of utilizing patients in a given population but also we must ask the question “Do we have the patient utilizing the most cost effective therapies.” We have always stated that it is not necessarily who can provide the cheapest price on Nexium but rather who can get the patient stabilized on a therapeutic alternative such as Omeprazole (generic Prilosec).
That being said, to state that price is not important is akin to saying that it’s okay for gas to go to $50 per gallon as long as you build me a better car that utilizes less gas.
Would it not be best to control both utilization and price? Sure it would and at CPS that’s exactly what we do. Don’t necessarily buy on price but never discard it as not being important.
Joe,
To be fair, when you write about Workers Comp prescriptions and PBM’s, shouldn’t you put in a little disclaimer at the bottom of the blog noting that you WORK for PBM’s, in particular, PBM’s that are very heavy into Worker’s Comp. I believe you have your own interests at hand here.
Let’s look closely at Mr. Paduda’s post. First of all he states “From the big big world of national health care reform…”. What is the “big big world of health care reform” to Joe Paduda? It’s the NCCI and himself. Who are these people? Why, they are insurance companies. In other words, according to Joe, health care reform can only come from Big Business and the Insurance companies. Forget about patient care.
When Joe talks about Utilization, what he really means is: Formularies that will dictate which medications are allowed by the PBM. Don’t get me wrong, formularies are great, especially for dispensing more generic drugs, but Joe has another motive. PBM’s who claim they save money with utilization, actually line their pockets with millions of dollars they receive from drug companies in the form of “rebates”. These rebates are given to the PBM’s by the drug companies so their product can be kept on the PBM’s formulary. The money the PBM’s make from the drug companies is kept by the PBM’s. They do not pass along any savings to the State’s or carriers. In fact, states have sued PBM’s for some of the monies, but the PBM’s claim that the “amount” of rebates they receive is “proprietory”. As long as there is Forced Utilization/formularies the PBM’s make money off the back end. States should have fee schedules for drugs, and create their own formularies and they wouldn’t need a PBM as a middleman. After all, a PBM is a middleman. They don’t dispense drugs, they have no medicine as inventory, they are just a middleman. Can anyone name me any industry that has a middleman so that they can save money? I always thought that a smart consumer cuts out the middleman.
Joe also claims that if utilization is not used early on then “they will be getting the wrong drugs for years.” Wow Joe, the WRONG DRUG, for years!!! Who are you or the PBM’s to decide what the wrong drug is. I guess all the doctor’s out there are idiots and are giving their patients the wrong drugs for years. Who exactly will decide what the right drug is? The CEO’s and accountants and shareholders of the PBM’s? Or is the WRONG DRUG the one which pays off the least amount in rebates? These Clinically based programs that decide what is the RIGHT drug, who sets up these clinical studies? THE PBM, and what does the PBM care about, the bottom line. When do patient advocates and actual Medical doctors get involved here Joe?
Mr. Rontiris,
It is all too obvious that you did not bother to read any of my other 900+ posts on pharmacy, insurance, health policy, off-label usage of drugs, big pharma, managed care, etc. If you had, you would have avoided public embarrassment from this demonstration of your ignorance.
The national health policy scene mentioned in the post is exactly that – I spent three days blogging on just that topic from a national progressive conference in Washington. And nowhere have I stated that health care reform must come from big business and insurance companies. Your failure to even read a few posts from last week is apparent in your uninformed and ignorant commentary.
I am continually amazed by the ability of folks like you who have neither met me nor read my posts to infer my motivations and use that inference to impugn my character.
Go back and do your homework. Your childish insults and character assassination are born out of ignorance, an ignorance that does you no credit.
Joe Paduda
Joe,
You failed to cover any of the things I mentioned, such as PBM rebates, the fact that you WORK for the PBM’s (therefore your entire blog is rather biased, the fact that PBM’s are middlemen who increase costs, that PBM’s are playing medical doctor with their forced utilization and all the other nice things I mentioned.
Joe, It’s not that I don’t like you, I can’t have a real judgement of you because I never met you sir. I admire what you do, working for the PBM’s and insurance carriers, while having a site up where you claim to be unbiased. Very crafty sir. If you are ver in NY, I invite you to come on down to our pharmacy. Seriously. I will take you out for a very nice authentic Greek lunch, we can drink some very strong wine and debate, friendly debate. I am serious, but please, don’t tell me I am wrong about the ills of the PBM’s. I know I am right. Why? Because every state in the Union has either sued or is suing PBM’s for fraud. My state, NY sued Express Scripts for millions of dollars. Middle men do NOT save money Joe. They end up costing you more.
George
Mr. Rontiris – what do you say to the PBM’s that do not accept rebates? They don’t exist? Well I happen to work for such a PBM and to paint with such a broad brush is just flat out wrong. We tout the fact that we do not accept rebates. We do this to show that our motivation is not with the drug companies but with the payor – to make that generic conversion and find the best fit.
One more thing, yes – a patient can be on the wrong (or no longer necessary) drug for years. We have done several clinical reviews in which the claimant has been on a medication for YEARS that was designed for no more than 30 days. After consulting with the doctor, he/she would concede that the drug was no longer necessary. Who gets those savings?? Not the PBM – the payor. Luckily they had a “middleman” that looked into their best interest.
George you wrote “they will be getting the wrong drugs for years.” Wow Joe, the WRONG DRUG, for years!!! Who are you or the PBM’s to decide what the wrong drug is.”
I do not work for a PBM, but do in fact work for a managed care organization that tracks drug utilization in great detail. I see what drugs are being prescribed and by what Doctor. And to respond to your comment we can not decide the right drug but with our thorough analysis we can encourage the Doc to change the prescription if it is not pertaining to the injury. For example Actiq for back injury….. I dont think so….. It happens and we react to those type situations.
One of the few arguments among the personal insults and allegations from Mr. R is that middlemen don’t save money.
Let’s see. eBay does pretty well as a business, and it saves money for the buyer too.
Healthcare Claims Administrators are a middleman, and they save the consumer (employer and insured) money by negotiating with doctors and hospitals.
Heck, I’d even argue that a pharmacy saves money for the consumer by buying in bulk and passing the savings along to individuals. These individuals pay a LOT less than if they had to travel to the manufacturer and buy the drugs there.
Our economy is comprised primarily of ‘middlemen’. Yes, you can go direct to a pharmacy to buy drugs, or you can aggregate your purchasing power with millions of other folks and get a better deal. And there is no question PBMs get much better pricing than an individual consumer does at a pharmacy.
That being the case, I’m not surprised that pharmacies don’t like PBMs. But then, they don’t have to join their networks, if they can demonstrate how they add more value.
Paduda
Well said Joe!
Joe,
How much financial incentive is there for PBMs to request mail order delivery? If there is large incentive, why don’t they mandate home delivery for chronic meds? My thoughts are because the employer doesn’t want to force their members one way or the other.