With all the attention being paid to pharmacy prices, it’s time we dug deep into  PBM pricing, rebates, and what this all means to you.

We’ve learned from all the lawsuits, Congressional hearings, media blitzes and punditry is that this is everyone else’s fault.

We’ve heard that Ohio is suing Optum over alleged improprieties related to the state’s work comp and Medicaid pharmacy programs [to be clear, Optum’s Ohio work comp problems arose from Optum’s acquisition of Catamaran, which served BWC. The ensuing debacle was not due to Optum’s work comp PBM.]

We’ve heard testimony before Congress that it’s the manufacturers’ fault, the PBMs’ fault, the gubmint’s fault, employers’ fault.

To unpack the issue we have to begin with the list price of drugs vs the actual price.

And we have to separate brand drugs vs generics;  most of the press about prices pertains to brand drugs. These are medications that are still covered by patents; only the patent holder can sell the drug, and they can set any price they want. In work comp, brand drugs account for about 15% of scripts, but a bit over half of total drug costs; as the manufacturer has monopoly pricing power, that’s not surprising.

(Generics are drugs that have lost patent protection and can be made and sold by any FDA-approved manufacturer.)

In work comp, most states with fee schedules use “Average Wholesale Price”, a metric that is published by several entities- Medispan is one of the more common. It’s critical to understand that AWP is NOT the real “average wholesale price”, it is merely the price the manufacturer sent to Medispan et al. There’s no checking, auditing, or verification of this price by any outside entity; there’s no independent confirmation that the manufacturer’s AWP is what it charges for the pill.

To estimate the actual price, one has to factor in rebates and other financial mechanisms used by manufacturers to market their drugs. Rebates are paid to Pharmacy Benefit Managers – that then pass most of the rebate $$ along to employers and insurers – to encourage the PBM to “put the drug on formulary.” In English, that means the PBM makes it easy and cheap for you, the consumer, to get that medication.

source – Milliman

If a medication is not on a preferred formulary, it will cost a lot more, and you have to go thru the “prior authorization” process to get approval for it.

Clearly manufacturers are highly motivated to get their drugs “on formulary” – and they use rebates to incent PBMs, insurers, and employers to do just that.

So, when calculating the price of the pill, one has to factor in the rebate paid to the PBM/insurer/employer to get to the TRUE price – which is usually a lot less than the published AWP price.

Tomorrow, what this actually looks like – and a few more pricing definitions.

What does this mean for you?

Rebates are critical to understanding pharmacy pricing.

 

The information every work comp professional needs is ready – the annual comparison of every state’s workers comp laws is available here.  Put together by the experts at WCRI and IAIABC, it includes laws for each of Canada’s provinces too.

Oh, and in case you missed it, you can still get WCRI’s compilation of state laws on treatment guidelines and medical management here.

From NCCI we get a report on the impact of changing workforce demographics on injury frequency. One major change from previous research – older workers are getting injured more often than their younger co-workers. That’s a significant change, and one we need to monitor carefully.

Sticking with work comp, CWCI released it’s analysis of the impact of California’s formulary  – more drugs that are “exempt” from review were prescribed, but that’s just one finding

If you want to know what your REAL cost of healthcare is, check out the Kaiser Family Foundation’s healthcare cost calculator. Plug in some basic information, and – spoiler alert – be shocked.

Finally, there’s much talk about Medicare for All, who supports what, and all that stuff. And, a majority of people in a Fox News “town hall” indicated they support MFA, surprising Bernie Sanders and his interviewers. Find out how much support there really is here.

And happy spring!

 

A few years back an acquaintance called me to ask for help finding a job; s/he’d been let go after a merger.

While we had known each other for some time professionally I’d always found him/her to be hard to reach, not responsive, and somewhat arrogant. When s/he needed something, the expectation was I – and no doubt others – would respond fully and immediately.

Now s/he was reaching out for help. And again the expectation was a full and immediate response.

I attempted to gently inform the person that they were in a different position now, and would make a lot more progress – and get a lot more help – if they handled things a little more diplomatically.  I won’t characterize the response, as I may have misinterpreted it.

I sort of understand this; as a buyer, the person was used to being accommodated – if not outright fawned over – by vendors eager to curry favor. The golden rule applied – S/he who has the gold rules.

As I think back on this, I recall being in meetings with this person where vendors were told to improve results. When those vendors attempted to meet his/her needs by suggesting program changes, IT connection improvements, or different communications procedures, the answer was always the same – we don’t have the resources to do that, that’s your responsibility, you figure it out.

The net is this.  Buyers do not help themselves by bossing potential vendors around, being unnecessarily difficult, demanding, unrealistic and dictatorial. And, often vendors can’t meet certain objectives unless the client pitches in as well. Sure, every payer has limits, resource restrictions, and budget constraints, but expecting a vendor to deliver data to your system seamlessly, consistently, and accurately while refusing to upgrade your technology to allow that is not only unrealistic, it is certain to fail.

That’s on the business side.

On the personal side, individuals who conduct themselves this way may well find things change when they no longer “have the gold”. Their calls go unanswered, references aren’t provided, job leads not shared.

What does this mean for you?

Many vendors have excellent ideas they’ve learned from working with other payers, ideas that can make your program more effective, efficient, impactful. Ask them what you can do to better work together.

And remember the real golden rule –

 

In a move that caught all Capitol Hill – and me – by surprise, President Trump and key Senators finalized the outline of the GOP’s new healthcare plan over the weekend.

Set to be announced later today, the plan builds off the faith-based “sharing” programs already in place in the ACA, greatly expands their reach, incentivizes employers to adopt faith-based coverage, and enables these programs to compete in the senior market. There are a half-dozen or so ministry/faith-based programs now in operation with total membership around the million mark.

Unlike regular insurance, members “share” the cost of care by paying into a central fund that then reimburses individuals for needed medical services.

Currently faith-based coverage is provided by entities including Liberty Healthshare, Christian Medi-Share, Samaritan Ministries, and Altrua Healthshare. As of today, these entities don’t have to provide the same level of benefits, coverage, or financial protection insurers do under the ACA. And, they are pretty much exempt from regulation as they aren’t “insurance” per se.

Faith-based sharing programs will compete with the big healthplans for members in the federal – and perhaps states’ – healthcare exchanges. The plans, which are much less expensive than “regular” health insurance, may well see huge gains in membership.

On ABC’s thisweek Sunday talkshow, Whitehouse Chief of Staff Mick Mulvaney  asserted the plan would deliver on the President’s promise to protect Americans with pre-existing conditions. “We’ve heard it over and over again, Americans trust their churches and ministers to do the right thing [which includes addressing pre-existing condition coverage]. So, we’re going to build off the amazingly successful faith-based programs now in place, expanding their reach and helping them compete in the free market.”

When asked how the new plan would maintain or expand the number of Americans covered by health insurance, Mulvaney didn’t get into any details other than claiming “faith-based programs will have much lower administrative costs as they don’t have all the overhead the big insurers do…this will make insurance much less expensive, which means more people can afford it.”

It appears Vice President Mike Pence has been strongly advocating for the faith-based approach for some months.  Evidently Pence, a self-described evangelical Christian, was prepared when the President publicly called for Republicans to be “the party of great healthcare” last week. The VP met with Trump, Mulvaney, and key Senators over the weekend and finalized the outline of the plan.

Mulvaney, who is one of the members of Trump’s team leading the charge on repealing Obamacare, said Sunday “There’s absolutely zero daylight between the president and vice president on this issue.”

Interviewed on CNN’s State of the Union yesterday, Mulvaney went further, describing the plan as fulfilling Senate Republicans’ request that the Administration provide them with “principles” that they could build a healthcare plan around.

Here’s the issue. Faith-based programs don’t have to keep a certain level of financial reserves, can deny payment for any reason, exclude any condition, and cancel coverage. And, in most states no regulator is watching over the programs.

Sure, this will make “coverage” cheaper, but there’s no guarantee it will be there when the buyers need it.

I’d expect this approach to face tough sledding in the Senate, and likely won’t be considered at all in the Democratic – controlled House. However, it’s likely Trump will try to do much of the heavy lifting via regulatory means and Executive Orders. However, these efforts will undoubtedly be challenged in court, where Trump has had a pretty poor record. I’d also expect the big healthplans will roll out their lobbying big guns.

But…the move further cements Trump’s standing with evangelical. As he’s clearly playing to his base to prep for the next election, it will serve him well.

What does this mean for you?

Just when you think you’ve heard it all…

Facility costs are the fastest growing cost in workers’ comp.

Rural hospitals are in deep financial trouble – many are shutting floors, wings, or are closing entirely.

Medicaid is all that is keeping many rural hospitals afloat – Mercy Hospital’s days are done…And work requirements will cost hospitals billions.

Arkansas has already kicked 18,000 people off Medicaid – mostly because the state’s Medicaid work requirement program is unbelievably poorly run, its leaders don’t know a damn thing about challenges faced by poor people, and no one at the state or federal level is demanding they get their stuff together.

(A federal judge just blocked the state’s work requirement.)

So, what does this mean for work comp payers in Arkansas?

• 18,000 more Arkansans are now uninsured
• Rural and urban hospitals are looking for pennies in the couch cushions.
• Work comp has lots of pennies.

The 9 reasons I love CWCI’s annual conference.

1. Consistently great content– timely, up-to-the minute data is analyzed and presented by experts who really understand the California work comp system, have deep experience in that system, and use that experience to draw inferences and conclusions that are highly relevant. No one does it better.
2. Topics are different than you find most anywhere else – this is a huge challenge for conference organizers, yet every year Swedlow & Co. focus our attention on key issues.
3. Example – Dr Kathryn Mueller’s discussion of what’s needed to obtain the best possible care and outcomes for work comp patients. Dr Mueller described what good “evidence” is, how it should be used in developing guidelines, and the integration of guidelines with utilization review. She also walked thru different approaches to best practices for RTW, the critical importance of functional outcome measures, and ended with a discussion of the latest thinking on pain management.

   That’s about 4 sessions’ worth of education in an hour, delivered by one of the nation’s leading experts. Damn she’s good.
   

4. It’s not just about California. While the focus is on the Golden State, we learn a lot that is just as useful wherever you work. CWCI was one of the first to come out with definitive proof that physician dispensing is a costly scam, focused our attention on compounds before most of us had heard of them, researched spinal fusion claims, and examined the impact of the new ICD-10 coding scheme on work comp.
5. They do all this in less than a day, yet…
6. There’s plenty of time built into the agenda to meet and catch up with colleagues built.
7. You get to hear Alex Swedlow, who may be the best presenter in the business. I’m biased as Alex is a good friend, but his dry-as-Death Valley wit, the way he weaves in lessons learned decades ago, and ability to pick out the one most important takeaway and ensure you understand it is unmatched.
8. There’s a bar. I don’t mean a bunch of lawyers, altho there’s plenty of them, but an actual place to get cocktails. At lunch.
9. It’s in Oakland, which means I have to travel to the west coast, where two of our kids are living, so I get to see them!
   Molly says hello from Santa Monica

 

There seemed to be a bit of nervous tension as CWCI’s annual meeting kicked off. After years of relative stability, and dare I say it steady improvement in many areas, it’s no wonder stakeholders are a bit trepidatious.

With a new Governor in office, new appointments in the offing, and some seemingly intractable problems still challenging stakeholders, the nervous tension is certainly understandable.

Fortunately, the first speakers addressed this head on.

General Counsel Ellen Langille led off with a summary of legal activity in the Golden State. My big takeaway was the King case.  CWCI filed an amicus brief in King v CompPartners which big win for all employers, taxpayers and yes patients. The Supreme Court upheld the exclusive remedy protection for utilization review organizations. Briefly, UR physicians were not deemed to be “treating physicians”, a sensible ruling indeed.

Ms Langille turned things over to Jeremy Merz and Jason Schmelzer for a summary of what’s coming. Both gave kudos to CWCI for providing much-needed data to help legislators understand what is really going on.

Schmelzer made a key point – politicians do not want to talk about workers compensation – they think it should just work. He also noted former Democratic Gov Brown vetoed more work comp bills viewed as problematic by employers than his Republican predecessor – Arnold Schwarznegger.  Point being, just because one is in this party or that does not mean they will hew to what you’d think is the party line.

While Gov Newsom is moving quickly on key issues, he has yet to show his hand on workers’ comp issues. The two experts opined that:

• Significant reform in work comp is unlikely as the system is seen as generally working well
• While it is expensive – it’s better than it was
• Key stakeholders, e.g. labor and employers – have bigger priorities.

One potential big issue is the independent contractor issue. While several bills are under consideration, it’s not clear any will get traction over the near term.

I would just add that there are lots of other issues that are way more important to important people than work comp; climate change’s impact on the state, water projects, battles with the federal administration on any number of issues, taxes, education, and many more. So, unless work comp is about to implode or explode, it is not going to get any traction.

What does this mean for you?

In California’s work comp system, things are likely going to remain stable at least for this year – and likely next.