Today’s NYTimes confirms that the deal struck by big PHRMA and the Administration over drug costs is set in stone; the White House confirmed that they will not go back to drug companies and ask for concessions beyond the $80 billion already promised. House Speaker Nancy Pelosi (D CA) has said Congress is not bound by the deal, but it appears that pharma is safe.
I’ll leave the sticky policy implications for a later post, but for now consider what this means for workers comp.
Recall that the current law of the land prevents negotiations by the Secretary of HHS with drug companies over price. This significantly limits the Feds’ ability to reduce costs, and is somewhat unique as most other of the G20 countries do negotiate directly with drug companies – either for prices directly or via a reference or index price scheme.
With yesterday’s ‘announcement’, the concern that work comp PBMs and payers (should have) had over the potential for a massive cost shift to comp appears allayed. There was significant concern that had the Feds forced the pharmaceutical industry to cut prices (via price negotiations, reference/index pricing, or a mandated Medicare rebate) manufacturers would raise prices charged to other payers – and the softest target out there in most states is the comp industry.
The big PBMs – CVS Caremark, Medco, Express – are all large enough to negotiate attractive deals on their own, and many of the payer-based PBMs would also be able to protect their pricing (or piggyback on deals cut by the big three). Not so for comp PBMs, which traditionally pay higher rates to pharmacies due to the higher handling and transaction costs associated with complying with state regulations and identifying and routing scripts.
What does this mean for you?
This doesn’t mean all is fine in the comp drug world, but it does mean the $2 billion plus industry has dodged a very large bullet.
Aug
6
I am not so convinced that the cost to pharmacies to fill work comp scripts is founded in fact! Work comp payers pay more for scripts because Pharma has persuaded far too many state work comp regulators that pharmaceutical fee schedules should pay pharmacists a premium above and beyond “average wholesale”. The work comp reporting system – in this day and age of computers and applications – suggests a different conclusion. Point is this: That claim is difficult to substantiate even for the venerable WCRI!!