Yesterday the Illinois Workers Comp Commission voted in favor of a regulation that would tie reimbursement of physician dispensed drugs to the price set by the original manufacturer. While this regulation has to pass thru a legislative committee before it can be implemented, that was good news indeed for Illinois’ work comp claimants, employers, and taxpayers.
The meeting was well-attended, and included representatives from the insurance industry, health care providers, PBMs (yours truly and others) and industry trade groups.
Noticeably absent were the drug chains, including Walgreens. I’m at a loss to understand this, as the WCRI report released last week showed 62% of pharmacy costs in IL are from physician-dispensed drugs. Those patients are NOT going to their corner pharmacy if they are getting their meds from their docs.
When patients get their medications from their doctors, they are at greater risk as the doc likely isn’t fully aware of the other medications the patient is taking, a risk that would be substantially reduced if they went to their pharmacy, where the pharmacist likely knows if there’s going to be a problem due to an interaction between the new drug and the patient’s current medications. Walgreens et al knows this is one of their big value propositions – the added safety inherent in going to your pharmacist.
From a purely financial point of view, the chain drug stores are missing out on thousands of store visits as well, where the claimant picks up their meds and likely some toiletries and perhaps milk too.
There are over 1900 pharmacies operating in Illinois; if one was at the meeting they didn’t announce themselves.
On a broader front, the Federal work comp program implemented an almost-identical requirement about a month ago in a move undoubtedly applauded by everyone who pays income tax to the Feds. No longer will physicians dispensing drugs to Federal workers be able to inflate costs by using repackaged medications costing several times more than the same drug bought at a retail pharmacy.
There’s bad news as well, but we’ll save that for another time.

After the release of its much-awaited update on physician dispensing in workers comp, WCRI found itself under verbal assault from physician dispensing company Automated Healthcare Solutions.
AHCS, perhaps the largest firm in the business (and partially owned by Boston-based ABRY Partners, who also owns Gould and Lamb and York Claims), said this about the study and WCRI in an email to WorkCompCentral’s Mike Whitely:
“It is not surprising that this unscholarly work is the vehicle being used to deliver a self-serving message the insurance industry wants the public to hear…Despite repeated requests, WCRI has refused to make available its underlying data for prior reports, which leads us to believe that this questionable work has not been properly peer-reviewed and has not been validated by an independent third party.”
Talk about cranky…
First, this statement is from the same AHCS that has repeatedly quoted WCRI in its written statements supporting physician dispensing of repackaged drugs. Including at the last Illinois fee schedule meeting, where AHCS employee Gary Kelman MD quoted extensively from WCRI’s previous work in an attempt to justify the higher costs and utilization patterns exhibited by physician dispensers. Their advocates have also used WCRI’s reports and statements in Hawai’i, where they succeeded in delaying controls over costs for physician-dispensed repackaged drugs
Second, WCRI has a well-deserved and long-held reputation for unbiased, high-quality and well-done research. If anything, critics (including me at times) have lamented the time it takes WCRI to produce reports. Aggregating data from different companies, ensuring data quality, reviewing findings, and QA’ing every analysis, calculation, result, and formula before you even get to writing up results takes a lot of time and talent, and that’s before you get to writing up the results and fact-checking each and every statement, figure, statistic, finding, and conclusion.
Third, WCRI is funded by a variety of sources, which AHCS could have checked easily if they wanted to – insurers, state regulators, labor organizations, employers, and others. Or perhaps they did and didn’t want to mention the broad funding and support base enjoyed by WCRI.
Let’s also not forget WCRI doesn’t take stands or suggest policy – they never have. That’s not their function, and it is one they take very seriously.
For AHCS to impugn WCRI is a classic case of shoot the messenger. Fact is physician dispensing drives up costs, enriches a very few physicians, dispensing companies, and private equity firms (ABRY in particular), and risks patient safety while increasing disability duration, hurting employers, and increasing taxpayers’ burden.

Tis the season for drug trend reports. Recent releases from PMSI, Express Scripts (ESI), and Progressive Medical show an ever-increasing level of sophistication and growing insight into cost drivers in workers comp pharmacy. Moreover, the layout, graphics, use of charts and layout are far superior across the board.
I’d caution readers against using these reports to directly compare PBMs; mix of business/client base, average age of claim, jurisdictional market share, and other factors make direct comparison of statistical results inappropriate. For example, one PBM might have significant share of the state funds, other PBMs typically service large carriers; some may have a large book of older claims (with higher spend, more opioids, and lower generic fills) while other, newer PBMs will have fewer legacy claims.
Here are some of the highlights from each.
Industry founder PMSI has been producing reports longer than most; their latest release includes chief clinician Maria Sciame, PharmD’s video discussion of the report. It needs a bit of highlighting, as at 72 pages, it is by far the most voluminous of the studies. PMSI saw an average cost increase of 3.2% with a higher cost per script somewhat mitigated by lower utilization. (in fairness, PMSI’s book likely has a higher proportion of legacy, long-term claimants than other PBMs, again making direct comparisons inappropriate; their average claim is 4.9 years old)
Average blended prices (weighted brand and generic) were up 6.3%, driven almost entirely by an 8.3% jump in brand AWP. These increases were somewhat mitigated by PMSI’s high mail order penetration and the attendant lower customer pricing; due in part to their mix of business, 27.5% of their scripts were home delivered. Narcotic utilization per claimant also declined.
Of particular interest is the lengthy discussion of differences in drugs used by claimants as claims age. In general, costs, and the number of scripts, go up rapidly over the first six years, level off somewhat, then cost trends upwards again after ten years while the volume of scripts stays level.
ESI released their drug trends report a couple weeks back. The big news is spend – measured on a cost per user-per year basis – decreased by 1.8%, driven primarily by a drop in utilization. Notably, narcotic spend decreased 3.6%, influenced by a 6.2 percent decline in OxyContin(r) spend. Overall costs could have dropped further if claimants had taken full advantage of home delivery/mail order, maximized generic substitution, eliminated physician dispensing, and used in-network pharmacies.
Express focused their report on opportunities for payers to reduce costs by addressing unnecessary spend, or waste. Their estimates indicate payers could reduce costs by some $2.1 billion by eliminating “waste”. While most of this reduction would come from greater use of generics, ESI also noted a significant increase in the cost of compounds; over the last four years costs have more than doubled. Substituting commercially-available alternatives for compounds would save hundreds of dollars per script…
Progressive Medical reported a 1.3% drop in spend per claim for 2011 as well, with narcotics down 3.9%, this despite an average increase in AWP of almost six percent on a per-claim basis. PMI’s report provided detailed explanations of legislative/regulatory changes during 2011, as well as a lengthy, and informative forecast of issues including new drug approvals, FDA activities and societal issues affecting pharmacy management. Unlike other PBMs, PMI does not see third party biller activity as an issue. This is unsurprising, as their ownership by Stone River enables PMI to apply their negotiated discounts to all bills coming thru Stone River Pharmacy (the leading third party biller).
As with other PBMs, Progressive focused on compounded medications, with their data indicating a very small (1.2%) increase in the average cost of compounds, offset by a 3.9% decline in the percentage of claimants using compounds driven by PMI’s requirement that all retail-dispensed compounds go thru a prior-authorization process.
There should be a couple more reports out shortly; when they are we’ll get them out to you as well.