New York announced significant (some would say drastic) changes to the state’s WC Laws and Regulations last summer. These changes will result in a dramatic decrease in WC premium rates in the state, something long overdue, and much welcomed. There is a lot of good in the new regs, but there are also a couple of problems.
The one issue that is most troubling pertains to drugs.
For those who (hard to believe I know) don’t focus on this to the exclusion of everything else in the world, here’s a quick recap.
— fee schedule has reduced drug prices from U&C to Medicaid (roughly AWP-14% for brand and AWP-55% for generic, plus a modest dispensing fee)
— PBMs are allowed, and direction to specific pharmacies is specifically allowed
— there are rather extensive notification requirements for payers – posting lists of in-network pharmacies in the worksite, updating claimants on changes, etc.
— physicians are required to note on each script that it is for workers comp; this will enable the pharmacies to price to the FS.
— pharmacies are required to accept the FS; no higher payment is allowed.
While the state is working on the final version, the emergency regs have been renewed (?) several times, most recently on the 7th of January. Although the regs do not appear to have changed at all, there is much going on behind the scenes. There are several entities weighing in on these changes, but the locus of control appears to be Governor Spitzer’s office.
In focusing exclusively on price, NY is failing to address the real cost driver – utilization. Several studies, including ones conducted by my firm as well as the NCCI, indicate utilization is a more significant contributor to total cost than price-per-pill.
The reality is the NY FS is so low it is less than the price WC PBMs pay for drugs. PBMs will not be able to convince pharmacies to accept reimbursement that is even lower than the Medicaid rate (about as likely as the Giants moving to Albany).
At the Medicaid rate, those PBMs that continue to operate in the state (likely only as an accommodation for their national clients) will not be able to provide any utilization management services, such as Prior Authorization, call centers, clinical review, peer review, physician profiling, or counter-detailing. There are also significant costs associated with building and maintaining a pharmacy network, costs that make NY a losing proposition for PBMs.
What does this mean for you?
The changes in NY, while well-intentioned, exemplify the blunt instrument approach to policy making. Designed to promote PBMs, they will likely result in PBMs leaving the state. Designed to control costs, they will likely lead to increased utilization.
Intended to reduce medical expense, they may well lead to higher drug costs.
The NY fee schedule not only impacts prescription drugs, but durable medical equipment as well. Reimbursement on items such as bone growth stimulators are so low that products may well disappear from the WC arena.
It is a perfect example of law makers adopting changes on something they do not have a clue about. Work Comp pharmacy is NOT the same as Group Health!!!!!!!!!!! The state of NY got lazy and basically “cut and paste” medicaid rates for not only pharmacy, but DME too. If they did their homework they may have figured out that there is more to cost than the bottom line. All well.
Joe no offense but you, Court and Chris are NUTS. Our PBM who I won’t mention, is accomodating our NY needs on the new pricing AND maintaining all of those management tools and checks and balances. Only a 30 claim file sample had a reduction of over $9mm from these changes
Sanity – if you knew your cost of goods sold was higher than the price you received, would you continue to sell those goods? Because that is exactly what is happening in NY to every WC PBM.
There are only three reasons a PBM would do that. 1) they are charging you, the payer, more than the FS; 2) they are using a group health BIN to process; or 3) they are losing money in NY and making it up in another state.
They aren’t making it up in volume.
Joe, I couldn’t agree more with your post, and your reply to Sanity. NY is a real mess right now with everything that is going on with this ridiculous fee schedule. Did you have to dig the knife deeper by reminding me that the Giants (and the Jets) don’t even play in NYS?
Joe, I forgot to mention that if you have not brought up the issue that many patients have not been able to get any medication at all under this new system. Why are you not mentioning this?