Why Medicaid Rx reimbursement rates don’t make sense for Workers Comp

Regulators are increasingly seeking politically low-cost ways to reduce workers comp costs. Some have decided to use the Medicaid reimbursement rate for drugs for Workers Comp, evidently figuring that if pharmacies accept it for Medicaid, they’ll do the same for WC. Same ‘logic’ evidently goes for PBMs.
The only problem is it is dead wrong.
1. Unlike Medicaid, there are no copays, restrictive formularies, or other cost- and utilization containment measures. Thus all cost containment efforts in WC for drugs involve resource-intensive Drug Utilization Review processes; pharmacists and clinicians reviewing scripts for appropriateness, medical necessity, potential conflicts and adverse outcomes, and relatedness to the WC medical condition.
2. PBMs pay pharmacies more for WC drugs than for Medicaid drugs; a lot more.
3. Unlike Medicaid, to the extent they exist at all, rebates are much lower in WC. Medicaid rebates are a minimum of 11% of the Average Manufacturer’s Price per unit (and even higher in many states). The rebate revenue significantly reduces states’ costs for drugs. As these rebates are much lower or nonexistent in WC, PBMs do not have rebate dollars to offset their drug costs.
Unlike Medicaid, most workers comp claimants have no idea how WC works, much less who their insurer is; the chances of the claimant presenting with a card is therefore quite low (less than 25% of all WC first fills go to the appropriate PBM). When a Medicaid recipient shows up at a pharmacy, they have been enrolled and thus have a card, and the transaction process is instantaneous and very low cost.
There is no positive enrollment in WC, unless the claimant presents a card, the pharmacy has no way to identify the appropriate PBM. This presents pharmacies with a high level of risk, a level that is not balanced by a reimbursement that makes that risk level tolerable. Specifically;
1. pharmacies are ‘at risk’ for initial fills where they cannot be sure the carrier/employer will accept the claim – this higher risk level requires a higher reimbursement. There is nothing preventing an individual from writing ‘WC’ on a paper script, thereby perpetrating fraud on the pharmacy.
2. the current regs pay pharmacies 25% more for scripts that are ‘controverted’; that is, where the carrier/employer has said they will not (yet) accept the claim
3. The ‘controverted’ situation is very similar to first fills – the carrier/employer has not indicated they will accept the claim, yet the pharmacy is required to fill it, without guarantee of reimbursement
4. the additional risk forced upon the pharmacies may lead them to:
• not fill scripts without a claim number/specific notice from the carrier/employer
• use the claimant’s existing profile (usually a group health PBM card) to fill the script, thereby increasing group health costs
• require the claimant to pay cash which they may, or may not, be able to do
We’re all for reducing work comp medical expense, but the blunt instrument of deep, and inappropriate, cuts in reimbursement for drugs is also counterproductive.
The key driver of prescription drug cost inflation is not the price per pill but utilization – the volume and type of drugs dispensed. The National Council on Compensation Insurance’s recent study on drug costs in workers comp stated “Utilization changes are the driving force in drug cost changes for WC…Utilization is the biggest reason for cost differences between states” (Workers Compensation Prescription Drug Study, 2007 Update; Barry Lipton et al; NCCI, p. 4, 6).
PBMs have adopted and are continuously improving programs designed to address inappropriate utilization. These programs include
• development of clinical evidence-based guidelines for the use of drugs for musculoskeletal injuries
• outreach by PBM physicians in specific cases where the drug treatment plan may be inappropriate
• data mining to identify potentially questionable prescribing patterns including off-label usage of drugs such as Actiq and Fentora
• Prior Authorization of specific drugs (e.g. narcotic opioids, cardiovascular medications).
What does this mean for you?
If PBMs don’t operate in a state or can’t generate any margin, they’ll eliminate any and all utilization control measures.
And drug costs will increase.