Apr

Drug Trends in Workers Comp

Posted by Joe Paduda on Thursday, April 23rd, 2009 | Comments

Workers comp PBM and medical services company PMSI released its annual Drug Trends Report at RIMS earlier this week. I noted a couple highlights in an earlier post; you can download a copy here.
One of the more notable findings is the increase in the rate of inflation in drug costs, this coming after several years of decreasing inflation rates. A key contributor was per-script price increases which amounted to 6.1% in 2008.
There’s lots of good information in the Report, and you can’t beat the price.
My firm will be conducting the Sixth Annual Survey of Prescription Drug Management in Workers Comp next month; this survey focuses on tools and techniques employed to manage costs as well as payer executives’ views on cost drivers and PBMs.
For the fourth consecutive year the Survey is sponsored by Cypress Care.
Send an email to infoAThealthstrategyassocDOTcom if you’d like a copy of the report.

Apr

The ‘new’ approach to work comp pharmacy

Posted by Joe Paduda on Thursday, April 16th, 2009 | Comments

Today we take a deep dive into the very tiny pool of workers comp pharmacy benefit management – where there’s a recent development worthy of note.
The latest iteration of factoring company Third Party Solutions recently unveiled their new marketing strategy – at least it’s new to parent Stone River.
Stone River Pharmacy Solutions (SRPS) is repeating a strategy employed in the past by previous owners of TPS and WorkingRx – partner with retail pharmacies while simultaneously selling itself as a pharmacy benefit manager.
The pharmacy partnership’s value proposition is straight forward; less paperwork, faster pay, fewer hassles for the retail shops if they’ll sell their work comp scripts to SRPS.
Here’s their pitch to pharmacies:
“The bottom line is your bottom line. StoneRiver Pharmacy Solutions helps you build your business by containing administrative costs, increasing revenue and therefore profits…”
No mystery who their customer is – the retail pharmacy. Nothing new there.
What is somewhat new, well, at least new to SRPS, is the boldness of their approach to employers and other work comp payers. Remember, these are the folks who have been driving up pharmacy costs, reducing network penetration, suing insurance companies and PBMs, hassling adjusters and employers for payment, and otherwise making payers’ lives miserable for years.
But all that’s changed…
Here’s how SRPS puts it…
“Helping employers and payors care for injured employees while managing and reducing pharmacy-related cost is more than our mission. It is a commitment we live daily by delivering our industry-leading solution in workers’ compensation pharmacy care management.
We Ask. We Listen. We Carefully Consider. We Deliver!”
There’s a logical disconnect here; on the same webpage, SRPS claims to deliver “improved revenue and profits” to retail pharmacies. How, pray tell, can a vendor increase a provider’s revenues and profits while reducing payers’ pharmacy-related costs?
Anyone?
There’s more.
“Despite participation in workers’ compensation prescription programs, many employers and payors fail to achieve anticipated cost savings. Injured worker’s routinely don’t know or fail to identify the pharmacy program through which to process their workers’ compensation prescriptions; therefore, the pharmacy uses a default billing service. Until now default billing services have been unable to apply financial or clinical controls to these prescriptions. Without these controls prescriptions are processed out-of-network and higher priced medications or medications unrelated to the patient’s injury are dispensed.”
Hmmm, perhaps the copywriters haven’t kept abreast of the latest information on drug trends in workers comp. In fact, the trend rate for pharmacy has decreased each year for the last five years, and was below 5% last year. This at a time when PBM penetration was growing dramatically, clinical management programs were starting to deliver real results, and payers were aggressively contesting third party biller business practices.
Oh, and SRPS’ predecessor organizations were claiming they could apply ‘clinical and financial controls’ to scripts years ago. What’s different now? Well, SRPS has cleared out all the old management, so perhaps they have some new whiz-bang process, or, more likely, they don’t have the benefit of knowing what was tried – and failed – in the past.
What does this mean for you?
You’ve got to admire their chutzpah. Just make sure to keep your hand on your wallet.

Apr

The latest on work comp drug costs

Posted by Joe Paduda on Tuesday, April 14th, 2009 | Comments

PMSI will be releasing their annual Drug Trends Report at RIMS in a couple weeks; they were kind enough to send a pre-release copy and give me permission to highlight a couple note-worthy items.
The lead story is cost. After moderating significantly in 2007, drug costs were up by over five percent in 2008, driven primarily by increased price. That is, while each injured worker got more drugs in 2008 than they received in 2007, most of the cost increase was driven by higher prices. But not for generics.
AWP, which remains the basis for drug unit pricing, went up over nine percent for brand drugs last year. (Generic inflation was negligible) With brand accounting for almost two-thirds of spend, the effect was rather significant in overall price inflation.
Interestingly, the introduction of new drugs had almost no impact on drug cost inflation in 2007 – but neither did the release of new generics.
There’s a lot more detail in the report, which should be available shortly. I’ll post a link as soon as it is.

Mar

Oxycontin – can you get some of your money back?

Posted by Joe Paduda on Monday, March 16th, 2009 | Comments

Friend and colleague Peter Rousmaniere sent the following to me; with his permission I’m posting his note in its entirety.
“I want to alert people to a case of criminal fraud by a drug company affecting pretty much every self insured employer and workers compensation, auto and health insurer. If you work for or advise one of them, you should learn about this case and know what to do. [emphasis added]
In 2007 Purdue Pharma pled guilty to criminal charges that it mislead physicians about the risks of addiction to Oxycontin. It paid a large fine to the Federal government. Now, a federal court is in the process of implementing a class action settlement, which enables any party that paid for Oxycontin between 1995 and 2008 to recover some of its payments.
This case is not just about Purdue misleading physicians to promote this drug. It is also about using deception to increase the probability that thousands of patients, many of them injured workers, will become psychologically and physically dependent on pain medication
The settlement is not designed to recompense injured workers whose lives were up-ended by addiction to Oxycontin. That would require another suit on behalf of these workers.
At this moment, is it incumbent on self insured employers and insurers to file by May 19 in order to recover from Purdue some of their Oxycontin outlays. [emphasis added] Go to www.oxycontintppsettlement.com. I’d appreciate your keeping in touch with me on this matter.”
You can reach Peter at pfr@rousmaniere.com.

Feb

FDA’s limits on prescribing of narcotics

Posted by Joe Paduda on Tuesday, February 17th, 2009 | Comments

Last week’s announcement that the FDA is considering requiring physicians’ to obtain additional training in order to prescribe certain Schedule II narcotics is welcome news – for payers and patients. Physicians aren’t so welcoming.
The list of drugs includes several varieties of morphine (e.g. Avinza, MS Contin), fentanyl (including Duragesic patches), methadone, and that old favorite, OxyContin. As a group, the listed drugs accounted for 21 million prescriptions written for 3.7 million patients in 2007.
The rationale behind the FDA’s move is concern over the adverse consequences suffered by many patients on the medications – consequences the FDA – and others – believe could be reduced by more thorough training of prescribing physicians. The FDA’s move came as a result of a law passed in 2007 enabling the agency to selectively address certain medication issues utilizing ‘Risk Evaluation and Mitigation Strategies’. In the past, the FDA’s powers were sort of all-or-nothing; they could either require warnings or pull a drug off the market.
According to the NYTimes, the head of the FDA’s initiative, Dr. John K. Jenkins, said:
“What we’re talking about is putting in place a program to try to ensure that physicians prescribing these products are properly trained in their safe use, and that only those physicians are prescribing those products…”
This is good news for many payers, who have expressed concern over physicians’ apparent willingness to prescribe very powerful drugs for conditions that didn’t appear to merit them. Workers comp payers have long held that prescribing patterns are a major driver of extended disability as well as high costs. I’d cite the use of OxyContin as a major issue for comp payers. Purdue Pharmaceuticals, OxyContin’s manufacturer, has been hammered by the FDA and others for its egregious, and illegal, marketing activities. While Purdue was fined $600 million, reports indicate the manufacturer’s OxyContin revenues totaled almost $3 billion during the time it was illegally marketing the drug.
What does this mean for you?
Unfortunately, it looks like in some instances, crime does pay. The good news is the FDA’s new initiative will likely help reduce not only costs, but more importantly adverse outcomes.

Jan

What now for Coventry?

Posted by Joe Paduda on Wednesday, January 28th, 2009 | Comments

Friday will be Dale Wolf’s last day at Coventry. After diversifying the company into workers comp, Medicare Part D, Medicare Advantage and private fee for service, and individual insurance, he leaves behind a much different Coventry than the one he took over in 2005. Don’t shed too many tears for Mr Wolf, he leaves after earning over $13 million last year alone.
The health world is also much different. Insurance itself is rapidly approaching the unaffordable level, participation rates are dropping (fewer employees signing up at companies that offer insurance), the Bush administration’s massive attempt to privatize Medicare and Medicaid will likely be reversed, hospital costs are exploding, and national health reform is around the corner.
And Coventry’s stock is a quarter what it was a year ago, while solutions to the company’s problems look ever further away.
Lots to consider, but I offer these thoughts.
The CEO is out, two weeks before the company releases its 2008 earnings report. The 65 year old former CEO is back. The company is not looking for a new CEO. Coventry’s commercial business is hamstrung by the factors noted above. It is not doing so well in Medicaid and Medicare growth will likely slow considerably. The company has not shown any expertise in managing care; it appears to rely solely on price increases to manage medical inflation. It has stumbled badly twice in the last year, both times failing to accurately forecast medical costs.
There is some thought that the company may be for sale. I’m one who leans in that direction. Recent news makes it more likely the company will not be sold in its entirety, but rather sell off pieces/markets/health plans. There are just too many moving parts in the 2009 version of Coventry; this complexity would make a comprehensive due diligence effort long and miserable – and given Coventry’s historical inability to predict health costs, potentially inaccurate.
But it is cheap.
Never one to forgo an opportunity to say something that will come back to haunt me in the future, I’m going to go out on a thin and ice-bound limb and opine that Coventry will sell off some health plans, and perhaps the work comp and other specialty businesses (e.g. mental health). A little less likely is a sale of the entire company.
What is unlikely is Coventry is essentially unchanged a year from now.

Dec

Why health reform will be so tough

Posted by Joe Paduda on Monday, December 15th, 2008 | Comments

From the world of workers comp comes a crystal clear picture of what’s wrong with America’s health care system, and how difficult it will be to get it right.
WorkCompCentral has a piece this morning about California’s proposal to not recommend topical analgesics – creams and ointment that are compounded at the pharmacy.
The pharmacy community doesn’t like the proposal, claiming “there’s [sic] prescriptions for these medications, patients have been getting relief, and we think that they should continue to be reimbursed for the medications that are being prescribed for them”.
Opponents of the proposed language also noted that it “conflicts with the DWC’s written policy stating that only “evidence-based, peer-reviewed research concerning the efficacy of a treatment can be the basis for recommending or not recommending a treatment.”
I’d suggest the opposite is the real issue – there is no evidence-based peer reviewed research documenting the effectiveness or efficacy of compounded medications. The pharmacists want to be paid for preparing and dispensing a medication which has not been shown to work. And they are pulling out the lobbyists and PR folks and ‘inhouse experts’ in an attempt to get California to back down.
Further. compounded medications are outside the scope of the the FDA’s authority.
About a third of US health care dollars are spent on treatments that are likely not effective. One has only to look at the history of MRIs, carotid endarterectomy, and angioplasty to identify billions of dollars that have been wasted on treatments that did not help, and may well have harmed, thousands of patients. These treatments, devices, and providers make money for their purveyors and manufacturers, dollars that they are loathe to give up.
Yet the approval process for these treatments/drugs/devices is is almost laughably low. Here’s how a UK researcher put it:

“the FDA dossier showed that the average improvement produced by drugs introduced in the 1960s was 17%, whereas with the drugs introduced in the 1990s it was 16%![emphasis added]…If one looks at the medical interventions we have for many diseases, whether they be psychiatric or neurological disorders, cancer, cardiovascular or respiratory or gastrointestinal problems, or almost any type of illness other than bacterial infections, what evidence-based medicine shows is that, as my colleague found, many of our interventions are pitifully inadequate. Our studies, although beautifully conducted, have been done on patient populations that bear only a limited relationship to those patients we actually see. The number needed to treat to achieve one success over and above that which could be achieved by placebo may be 10, 20, or even as high as 50. Thus, the trials actually give us almost no guidance as to the likely outcome of an intervention in the individual patient who sits in front of us. For many conditions, therapeutic effects are so small that neither the patient, nor the relative, nor the doctor is likely to be able to recognize any differences in the patient’s state as a result of our intervention. We pride ourselves on our large, well-conducted, immaculately analyzed trials that give significant results. But we have forgotten that we need to conduct such enormous trials only because our interventions are so minimally effective. If we were making a really large difference to the outcome, small trials would suffice and provide clearly significant results.”
That’s one side of the argument. Here’s the other.
I give you the condition known as ‘chronic lyme disease’. This tick borne ailment is pretty common in my area (central coast of Connecticut), in fact I live about twenty miles from Lyme. Walk down the main street in Madison and chances are you’ll encounter at least one person who has had recurrent Lyme disease – the mechanic, artist, college student, mom. Yet try to find a doctor who will treat chronic Lyme and you’ll find very few who will risk their reputation and medical license, as several physicians have been disciplined for just that.
The battle over chronic Lyme (and it is a battle) has been brutal, nasty, and vicious. Nay sayers claim no such disease exists, and cite research and articles in prestigious publications such as the New England Journal of Medicine as support for their opinions. Their opponents decry the poor quality and selective nature of that ‘research’, accuse the authors and study leaders of conflicts of interest, and note the successes – patients treated for chronic Lyme that get better.
Anecdotally, I know at least a half-dozen friends and neighbors who have suffered from some condition that robbed them of their energy, caused great pain, and prevented them from doing many of the things the rest of us take for granted. After extensive treatment (we’re talking over a year) with antibiotics, all have gotten better. Much better.
It is abundantly clear that medicine is an art as much as a science, and art is, as famously described, in the eye of the beholder.
And that’s one reason health reform, which must attack cost, will be so very difficult.

Dec

National health reform – implications for workers comp

Posted by Joe Paduda on Tuesday, December 9th, 2008 | Comments

I’ve gotten several queries about the future of work comp if/when health reform occurs. The real answer is – no one knows. But I’m happy to take an educated guess.
I very much doubt comp will be directly impacted by or addressed in any health reform bill. It is going to be difficult at best to pass health reform legislation; adding comp is unlikely to increase support but would almost certainly drive work comp stakeholders to lobby against the bill. There’s just no upside for including comp in health reform.
Back in the Clinton health reform days, comp was part of health care reform, where it ran into objections (most warranted) from employers, industry types, insurers, and providers. Work comp was addressed in Title X, which “would have required that employees receive all of their health care through the same insurance plan, regardless of whether the injury or illness occurred at home or at work.” For lots of reasons, this was a non-starter.
President Elect Obama may well have learned from his future Secretary of State’s errors: nowhere do the words ‘workers compensation’ or similar terms appear in President Elect Obama’s website, policy papers on health reform, or in the several speeches he has made on the subject.
Finally comp is not linked to/mentioned in the Baucus plan, Wyden/Bennett Healthy Americans Act, or on Sen. Kennedy’s policy pages. These should be viewed as drafts of final bills; if policymakers were actively considering incorporating work comp it is likely we’d have seen it appear in one or more of these bills.
What does this mean for you?
Don’t expect to see work comp directly addressed in reform legislation on the Federal level.
But, any reform initiatives will undoubtedly affect workers comp. Here are a couple specifics.
Physician reimbursement
The fall will be highlighted by a debate over Medicare physician compensation. With docs scheduled to see their reimbursement drop by around 20% in 2010, the caterwauling will be heard loud and clear inside the Beltway. Don’t look for a major policy change, but rather something to satisfy the physician community and build a little equity for the future. My sense is CMS will increase reimbursement for E&M codes (cognitive services). Almost all WC fee schedules are based on Medicare, so any change in Medicare directly and immediately impacts comp reimbursement. Watch Capitol Hill carefully; if Congress passes legislation signed by future President Obama affecting Medicare reimbursement, clinic companies may be big winners.
This will also be good news over the long term for comp in general. Good work comp medical care requires physicians to spend time listening to patients, and talking with employers, adjusters, and case managers. Docs don’t get paid (at least not adequately) for this time, therefore any increase in reimbursement for office visits will encourage docs to spend time with claimants instead of doing procedures. Well, at least not discourage doctor-patient discourse…
Medical care delivery
If there is a major reform initiative passed, there will likely be fundamental changes in the way health care is delivered, the virtual ‘location’ delivering that care, and the evaluation of care.
And that would dramatically affect workers comp.
Today, health care is delivered episode by episode; diagnosis, care plan, treatment, assessment, and repeat steps 2-4 until the situation is resolved. This episodic model of care will (over time) change to one based on functional outcome management – care focused on returning the patient to functionality, and maintaining that functionality.
This will be in large part driven by the growing influence of chronic care and need to develop a better care model to address chronic care, one that will heavily emphasize patient education and monitoring. It will also require a different ‘location’ of care – the medical home.Dr Kathryn Mueller of the University of Colorado sees the medical home model as a big part of the solution in workers compensation, as the medical home may well be the dominant model for delivery of care throughout the health system in years to come. Studies indicate the home decreases medical errors and improves the quality of care delivered. Notably, the medical home model is NOT a primary-care gatekeeper model – but rather a model wherein the physician is tasked with and responsible for coordinating care and educating the patient.
Drugs
If Congress calls for the Feds to negotiate drug prices, this will affect comp in one of two ways. Either comp payers will be able to piggyback on the Feds’ negotiated rates, in which case per-pill prices will come down, or (more likely) comp payers find their per-pill prices increase due to cost shifting.

Nov

What’s wrong with the US health care system

Posted by Joe Paduda on Tuesday, November 25th, 2008 | Comments

is exemplified by drug manufacturer Cephalon’s drug pricing strategy. The company’s narcolepsy drug Provigil is coming off patent in 2012. So, like any good corporation seeking to maximize shareholder wealth, it has developed a replacement drug – Nuvigil, that is a longer-acting version of the same medication.
But Cephalon is not content with just doing what other pharma companies do – patenting a long-acting version of an old standby, and releasing that LA version just as the older drug goes off patent. Instead, the fine folks at Cephalon are jacking up the price of Provigil now, to make it even more expensive. Then, when Nuvigil comes out, it will be priced less than Provigil, encouraging patients to switch.
And because there won’t be a generic for Nuvigil for years, Cephalon holds on to a nice revenue stream.
Cephalon is the poster child for sleazy pharma marketing practices. Just a couple months ago Cephalon pled guilty to illegally marketing Provigil and pain drug Actiq, and paid a $444 million fine for their criminal behavior. The company has been shoving Actiq down the throats of workers comp patients for years, despite the drug not being FDA approved for anything but breakthrough cancer pain.
No matter to the profit-at-any-cost execs at Cephalon. In their dedicated, unending quest for more shareholder wealth, they have proven they will do anything to gain more revenue.
Realists will understand that Cephalon’s strategy is short-sighted at best. With national health reform coming, one of the earliest items on the agenda is likely to be legislation encouraging/allowing the Feds to negotiate prices with big pharma. Although few industries are as adept at marketing as big pharma, there’s a new sheriff in town.
House Energy and Commerce chair Henry Waxman’s record on pharma is mixed. Co-author of the landmark 1984 Hatch-Waxman Act in 1984, which has had the effect of speeding up the introduction of generics while offering some protections for branded drugs, Waxman has more recently taken a more aggressive stance, putting drug development firms on notice that their attempts to circumvent patent expiration terms is unacceptable.
In a speech in 2005, Waxman stated:
“Current law does not strike the right balance. We cannot continue to have a system that
effectively enshrines permanent monopoly status for some of our most important medicines. Of course, some intellectual property protections are needed to encourage innovation by brand-name manufacturers. But permanent monopolies are neither needed nor wise.”
Waxman has been a loud and consistent critic of pharma’s reaction to Part D. Here’s an excerpt from the Congressman’s letter to the GAO in January 2006:
“A report I released in November showed that prices for brand-name drugs under the new Medicare drug benefit are 84% higher than the prices that the Department of Veterans Affairs negotiates for the federal government.[13] An analysis that GAO did for me in October 2000 showed that on average, Medicaid’s prices for brand-name drugs were 43% higher than the prices negotiated by the VA.”
What does this mean?
Cephalon’s shareholder-wealth-maximization strategy is short-sighted. There will be a major push in the next Congress to find the money to do something big in health care reform, and pharma profits may be a very attractive source. Cephalon’s blatantly greedy practices make it even more likely the Feds will negotiate price.

Oct

Cephalon – the worst of the worst

Posted by Joe Paduda on Wednesday, October 1st, 2008 | Comments

If you’ve been wondering why your company is paying so much for high-powered pain medications, here’s why.
Cephalon, manufacturer of Actiq and Fentora, has:
“agreed to plead guilty to promoting off label use of its painkiller Actiq–which was widely used for purposes outside of its original FDA approval–as well as narcolepsy pill Provigil and epilepsy treatment Gabitril. Cephalon has admitted that it had been marketing Actiq, a highly addictive narcotic lollipop produced to treat certain cancer patients, for off-label uses including migraines, sickle-cell pain crises and injuries.[emphasis added] (Fierce Healthcare)
Cephalon is the poster child for everything that is wrong with medicine in this country. They make me-too drugs; reformulate drugs to extend the patent life (fentora); aggressively market their drugs to docs who have no business prescribing them for purposes the drugs were never approved, nor are appropriate for; bribe docs to promote their drugs; and charge unbelievably high prices. Then, when the drugs do go off patent, they manipulate the price of the brand (doubling it in the case of Actiq), raising it and thereby creating a very high price for the generic. Oh, and their drugs have awful side effects – Actiq, which rots patients’ teeth is but one example.
In my work with workers comp insurers, TPAs, and self-insured employers, I see a lot of data on prescription drugs. Actiq and Fentora are almost always in the top five in terms of drug spend – (a month of Actiq easily runs $2500). Why is Actiq a big part of workers comp, you ask, because it is only FDA approved for breakthrough cancer pain, a medical condition that for all intents and purposes does not exist in workers comp? Because Cephalon has been pushing the drug to general practice docs.
In fact, only 1% of Actiq scripts were written by oncologists during the first half of 2006. So who’s dispensing the drugs?
Physical medicine and rehabilitation specialists were the second highest-dispensing specialty, accounting for 16 percent of scripts during the first six months of 2006, when oncologists and pain specialists accounted for less than 3 percent.
Cephalon will have to pay a $425 million fine, and (here’s the good part), publish the names of physicians it has paid to promote/research its drugs. The fine resulted from acase brought after a Cephalon employee refused to promote Actiq and Fentora to general practice docs, a decision that led to his termination by the company. That’s not chump change, but that shouldn’t be the end of Cephalon’s penance.
I’m hoping, really hoping, that payers will evaluate the settlement and perhaps (selectively) use the physician list to determine if they should disqualify docs from their networks, flag them in their published physician ratings, and carefully scrutinize their practice patterns.
Thanks to FierceHealthcare for the heads up on the settlement.

Category: Pharmacy, PBMs, and Pharma costs