Work comp drug spend is going down

On average payers’ drug spend dropped 6.5% from 2014 to 2015.

And the bigger payers saw bigger reductions, with several cutting spend by double digits.

Those are the results for 30 large and mid-sized work comp payers I surveyed for CompPharma’s annual Prescription Benefit Management in Workers’ Compensation Survey.  State funds, large and mid-sized insurers, TPAs, self-insured trusts, and very large employers all participated in this, the 13th annual Survey.

The big question is – why?

Before we jump into that, allow me to address a potential criticism of payers’ drug management efforts.  This reduction is NOT because payers want to prevent their patients from getting the care they need.  Rather, payers – and their PBM partners – are focusing on ensuring patients get the drugs they need quickly and with minimal hassle, while blocking potentially problematic drugs.

This effort has paid off in the near term in lower costs for employers and taxpayers, and will almost certainly result in quicker healing and return to functionality; patients who don’t get unnecessary opioids get better a lot faster than patients prescribed these dangerous and often-misused drugs.

The Survey report, which will be out in August, will have details.  At this point in our analysis, several drivers seem to be at play here.

By far the most significant is the depth and breadth of pharmacy clinical management programs now in place at most payers.  The vast majority of payers rely on their PBM partners for most clinical management functions, with responsibility delegated to PBMs for some/most/all functions including:

• patient enrollment
• formulary development and management
• prior authorization
• pharmacist review of claims
• prescriber outreach and follow-up
• peer review and interaction
• reporting
• high cost claim assessment and intervention

This is somewhat unique in the work comp medical management world.  Unlike surgery, hospitalization, and other service types, most payers have delegated pharmacy management to PBMs.  There are several reasons for this.

• Unlike other medical services, pharmacy is highly automated, requiring a unique electronic communication capability and expertise to accept, approve, process, and pay for the service.
• Few payers want to invest the funds and management resources necessary to effectively manage pharmacy.  With the continued focus on reducing administrative expenses, overhead is an evil word at most insurers, so outsourcing it just makes financial sense.
• PBMs have a lot more knowledge about pharmacy management as this is their core business.  Insurers, TPAs, and state funds have many other priorities on their collective plate, priorities that most view as more central to their core business.  They are insurers and claims handlers, not pharmacists.

That said, a handful of large payers have internalized pharmacy management – hiring pharmacists and nurses, instituting workflows specific to drug authorization, focusing on long-term opioid users, and tightening up drug formularies and approval processes.  These entities are also seeing solid payback on that investment, with costs dropping by double digits for these big payers too.

A final point that bears consideration.

Work comp PBMs, most of which are members of CompPharma (I am president of CompPharma), are doing a really good job and thereby reducing their income and profits.

They do this because this is how they win additional business; their value proposition is to ensure patients get the right medications and don’t get the wrong ones.

What does this mean for you?

PBMs are getting it done.