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Work comp drugs – What works in Washington…

There has been a lot of discussion about the WCRI report on Washington State’s workers’ compensation pharmacy costs. Unfortunately a good bit of the discussion has been rather simplistic, citing some of the findings without placing those findings in the correct context.
Washington’s workers compensation environment is unique. As one of the very few (that would be three) states with a monopolistic workers comp fund, the state’s regulatory reach and control over all aspects of workers comp is broad and deep. Simply put, Washington state can dictate terms to all participants including employers, providers, pharmacies, and other stakeholders, terms that the stakeholders must comply with. Moreover, providers and pharmacies in Washington do not need to concern themselves with eligibility issues, questions about coverage or payment or fiduciary responsibility. Compared to other states, this is a markedly different operating environment for providers and pharmacies.
News stories following the study’s release of the report stressed some of Washington’s cost-containment tactics, implying that other states could replicate these tactics and thereby enjoy similar benefits. However, neither WCRI’s news release or subsequent media stories stressed that Washington is a monopolistic state with a single payer system without the eligibility issues existing in states with multiple payers (carriers, third-party administrators and self-administered employers).
For pharmacies participating in the workers comp system in Washington, the single-payer system eliminates confusion and work associated with identifying their customer’s workers comp payer. The defined formulary and coverage policies ensure pharmacies’ ‘risk’ associated with dispensing medications to injured workers is quite low as pharmacies are all but assured that their bills will be paid. Moreover, pharmacies are tied electronically to L&I, further reducing their administrative expense and workload.
This environment could not be more different than the one in non-monopolistic states, where determining coverage is a complex and tedious task often requiring multiple phone calls and letters; ascertaining formulary compliance is difficult and uncertain; and pharmacies must assume substantial financial risk for medications dispensed to injured workers.
Given the differences between Washington and almost all other states, it is abundantly clear that what works in Washington will not work in non-monopolistic states. While simplistic solutions are often attractive, they are also often counter-productive.

One thought on “Work comp drugs – What works in Washington…”

  1. Joe, while Washington is a monopolistic state (non-competitive State Fund), the state does allow for self-insurance for workers’ compensation. Self-Insurers do understand competitive market forces … though self-insurers are obligated to follow the state fee schedule, or work out an arrangement for a PBM for even lower cost savings on prescriptions. Unfortunately, due to complications, self-insured data was not included in the study cited. It only reflects the State Fund.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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