Insight, analysis & opinion from Joe Paduda
If you’re still wondering why drug costs are going up so far so fast, here’s another reason. Direct to consumer advertising costs. Big pharma increased their spending on advertising by 9% in the first half of 2006.
Expect total spending on DTC advertising to hit $5 billion this year.
No wonder prices have jumped this year.
AWP has long stood for “ain’t what’s paid”, and the old saw has been validated by documents made public during litigation in Boston earlier this year. First DataBank, one of the publishers of Average Wholesale Price data, had been sued by several plaintiffs alleging that First DataBank’s benchmarking process was seriously flawed.
As a drugstore.com customer, I received an email (along with a few hundred thousand other folks) from the company’s CEO last week. The email was their response to the recent announcement by Wal Mart that they were cutting prices to below $4 for a month’s supply of almost three hundred generic drugs.
The net is the folks at drugstore.com claim to provide prices that are already lower than Wal Mart’s for the equivalent supply.
Actiq, the lollypop pain killer, is rapidly becoming the biggest problem drug in workers comp. FDA approved only for treating cancer pain, the potent narcotic is now on most payers’ top 5 drug list (ranked by dollars spent).
There are likely several factors that have enabled a drug clearly not approved for musculo-skeletal conditions to achieve this high “honor”.
Part D’s implications will be many, far-reaching, and complex. Why? the sheer size of the market…One-twelfth of all scripts dispensed in retail pharmacies were for Part D recipients.
Here’s a snapshot of the crystal ball.
Mark McClellan is leaving his post as head of the Center for Medicare and Medicaid Services. He served long and loyally, sticking to the Administration’s line even when facts indicated otherwise, remaining a calming force when Part D enrollment was going nowhere. McClellan is also known for listening hard to suggestions and criticism from all sides, and working diligently to address problems.
Here’s what’s happened during his tenure.
Part D was passed, implemented, and operational. This was a monumental task, and one McClellan was instrumental in accomplishing. It’s not his fault it is a fatally flawed program; well, maybe it is, in some small part, as he was probably involved in writing/editing/opining on the legislation. Nevertheless, under McClellan the program became reality, with the initial enrollment problems addressed (in large part).
With the news that Aetna has entered into the work comp pharmacy benefit management business, there are now officially a bazillion WC PBMs doing business. Maybe even two bazillion.
Aetna has been in and out of the WC business in the past, and now appears to be in it, at least as a managed care vendor. Aetna Workers Comp Access is the brand name for the company’s PPO network, one that is gaining some traction in certain jurisdictions. The new PBM venture appears to be an attempt to use Aetna’s group health-oriented PBM to deliver drugs to comp patients. But the WC PBM business is much much different than group health. There are no deductibles or copays in comp, identifying the patient’s PBM is much more of a challenge, and the country is a crazy quilt of different regulations, as each state sets its own rules, reimbursement levels, and operating standards.
The strategy is to cross sell the PBM to Aetna’s (group health) employer clients. One of the touted benefits is the ability to identify potentially harmful drug interactions across both group health and WC medical treatment. Aetna has landed their first customer, CostCo, and are also bidding on carrier business (several of the larger insurers have been or are out to bid for PBM services).
Aetna is not doing this on their own, but has contracted with Rockville, MD based CatalystRx to provide the WC expertise needed to operate in the comp market. This is a somewhat puzzling choice; Catalyst is not a big player in WC and does not have a lot of experience in the space. Their contribution will be key if Aetna’s newest venture is to become a viable option for comp drug buyers.
What does this mean for you?
Another option in the already-crowded WC PBM industry, albeit one with a different twist.
As a public service, I’ve put together a (partial) list of firms that repackage drugs for physician dispensing. This is primarily a workers comp issue, as comp insurers and TPAs are increasingly concerned about the cost of drugs dispensed by physicians. In some circumstances, the billed and payable amount can be several times higher than the cost for the same type of drug dispensed through a pharmacy.
The Hartford’s annual study of drug costs provides insights into what drugs are driving costs, and the results a carrier can expect if they work hard at managing drugs. The big insurer enjoyed a reduction (!) in drug costs year-over-year of one percent, driven largely by the demise of the COX-2 drugs and the emergence of generics for Oxycontin and Neurontin.
Heavy-duty pain med Actiq continues to be a big problem for the Hartford, as it is for other payers. Of note, one payer I work with has been able to sharply curtail the use of Actiq through a targeted clinical management program involving physicians doing peer review. And, Actiq is coming off patent next year, which may reduce the price per dose. (but the manufacturer has developed a “new and improved” version that will likely be used as a substitute…)
The Hartford’s results are not surprising. Payers with aggressive, integrated approaches to managing drug costs are experiencing modest increases in drug expenses, while those without a strong focus on managing pharmaceutical expense have been hammered by costs increasing upwards of 15% annually. The Hartford participated in my firm’s third Annual Survey of Prescription Drug Management in Workers Compensation; their results, and the results of several other large payers, helped keep the industry’s overall inflation rate to 10%.
The keys to success? Managing utilization. A strong clinical management approach. The intelligent use of prior authorizations. And a company-wide commitment, backed up by the resources needed to attack the problem.
What does this mean for you?
You too can control drug costs – by focusing on utilization and clinical management.
News reports indicate Amerisource Bergen (ABC), the hospital supply firm, is unloading its Pharmerica subsidiary. Actually, it is forming a joint venture with Kindred Healthcare to combine both companies’ long term care businesses in a new entity.
These companies provide drugs and supplies to nursing homes around the country, have annual combined sales of $1.9 billion and rather thin profits of $75 million.
Pharmerica also was the parent company of workers comp PBM Tmesys/PMSI, which evidently is staying within the ABC company fold.
Last week PMSI/Tmesys also made several changes in management, including promoting Mark Hollifield to president to replace Dave Weidner, who moved on to another senior position within the parent company. Hollifield, who was promoted to COO at the end of March 2006, is a well-regarded manager. Tamara Wagner, the long-time head of sales departed as well, and an interim sales leader was appointed from within.
Other sources indicate Coventry’s First Health unit is looking into entering the WC PBM business, likely by going the acquisition route.