Where the work comp world is headed – part 4, pharma costs

Much of my writing over the past few weeks has focused on the future of work comp – the impact of reform, economic influences, the increasing negotiating power of health systems, changes in Medicare’s physician fee schedule (which WILL impact work comp), revisions to Medicare facility reimbursement…
My last post covered what’s ‘just over the horizon’; specifically the growing marketing power of providers and resulting higher facility costs.
There are two other ‘over the horizon’ issues comp payers would do well to watch – pharma and physician reimbursement.
Here’s the quick and dirty.
Pharma pricing – specifically for branded drugs – was up over nine percent last year, and I wouldn’t be surprised to see that trend continue. At some point the Congressional Dems and White House may decide to get serious about controlling Medicare drug costs and change the law to allow HHS to negotiate pricing with big pharma. It would be a ‘win’ for the Democrats as it would:
– help reduce Medicare’s future liability (the Medicare Actuary reported late last year that the ultimate unfunded liability for the Part D program is about $20 trillion)
– put their political opponents into a box; by cutting the deficit the Dems would address one of their biggest political problems while putting Republicans into a tough spot; the GOP would have to choose between getting behind big pharma and therefore increasing the deficit or reducing the deficit and thereby agreeing with the Dems (horrors, bipartisanship!!).
If Medicare does negotiate pricing, there may well be an attempt on the part of pharma to raise prices paid by other buyers – I’m talking about you, dear reader.
Regardless, the end of First DataBank’s publication of AWP (within the year) means the 33 states that use AWP as the basis for their WC drug fee schedules have to come up with something different. Some have already chosen the “Red” version of the “book”; Redbook is fine, but it doesn’t include some generic pain meds, is not as up to date as it should be, and is viewed by many in the payer community as ‘favoring’ the pharmacy.
Out of time – we’ll do physician fee schedules tomorrow…