What the Illinois repackaged drug fix means for you

Now that Illinois has fixed its physician dispensing upcharge problem, there’s one less target for the dispensing industry.  While that’s great for the Illini, it’s not so great for those in states where upcharging for repackaged drugs is still allowed.

That’s you, Florida.  And you too, North Carolina, and Virginia, and Michigan.

You can expect the prices for repackaged drugs to increase, in some places dramatically. With Illinois joining GA SC AR MS CT CA AZ and other states where upcharging for dispensed drugs is essentially banned, there are fewer states where the dispensing industry can still plunder employers and taxpayers.  The dispensing industry must continue to generate ever-higher margins for their owners and investors, so they are going to increase prices and push for more scripts for more claimants from more physicians dispensing.

As WCRI has ably reported, prices for drugs dispensed by Florida physicians have held remarkably stable, while prices in other state, notably Illinois, increased substantially.  There’s some thinking that the industry has purposely held prices in the Sunshine State down in an effort to remove some of the pressure to pass a legislative fix.  After spending the last two days at the Florida Chamber’s Insurance Institute and conversing at length with  legislators keenly interested in the topic, my sense is the issue will once again be front and center in Tallahassee.

One anecdote points to the extent of the problem.  A good friend from a PBM told me yesterday that one of their clients sent them a $4300 bill for a repackaged drug, and asked what was to be done.  The PBM told them:

  1. that same drug would have cost $151 at a retail pharmacy
  2. as this was in North Carolina, where the fee schedule is “pay as billed”, there wasn’t much they can do.

This isn’t by any means a rare event. It is happening every day in many states, likely even your’s.

 

Sally Pipes on comparative effectiveness: flat-out wrong

Sally Pipes thinks using evidence-based medicine to produce better outcomes and avoid killing patients is “rationing.”

What utter nonsense. Pipes whole piece – in Forbes nonetheless -is rife with errors of fact, contortions of logic, and sloppy research.  Her highly selective parsing of others’ work is nothing short of intentionally misleading.

Here are a few of Ms Pipes’ errors.

“CER advocates say that it’s designed to correct a “market failure.” Right now, they argue, drug firms need not demonstrate that their product is better than those already on the market — only that it is effective at treating the disease it targets. Drug companies have little incentive to compare their products to those made by other firms — as they may not come out on top.”

Actually, CER advocates point to a failure of Congress and then-President Bush, not the “market”. Those elected cretins are the ones responsible for forbidding CMS from considering efficacy or effectiveness when determining how much is paid for a new drug or device (notably missed by Ms Pipes).  Yep, the 2003 Congress and Bush are the ones at fault when they passed the Medicare “Modernization” Act.

After all, why would you, dear taxpayer, ever want the Feds to care about wasting your tax dollars on marginally useful but really expensive drugs or devices?  Nope, far better to force CMS to pay whatever pharma or device manufacturers charge for stuff that might not work nearly as well as something that costs far less.

Ms Pipes goes on to find fault with CER, saying “for starters, doctors don’t always agree on what comparative-effectiveness research is actually telling us”.

No @&%$()*^.  THAT’S WHY WE NEED CER!  There’s waaay too much variation outside accepted practice norms, and this variation kills patients, drives up taxes, and increases employers’ costs.  Newsflash to Ms Pipes, some “doctors” are lousy, profit-seeking, patient-hurting, incompetent, or just plain bad.  Here’s just one example.

Next up; “Back in 2009, the U.S. Preventive Services Task Force — another government-run panel of independent experts — revised its breast-cancer screening recommendations by telling women to wait until age 50 before undergoing routine mammograms. Previously, the group had encouraged women to start mammograms at age 40.

One reason the Task Force cited for the change? Cost.”

As if somehow cost is bad?  Another newsflash for Ms Pipes – health care costs are out of control, largely because we do way too many procedures that we should not do. Ever heard of “entitlements”, Ms P?

Also note cost is only ONE FACTOR. Increased risk of cancer from too many radiation screenings received much more attention – as it should.

Why is Ms Pipes so blatantly, obviously, completely in error?   Perhaps an inability to grasp basic concepts of high school science is to blame, or maybe she has really poor reading comprehension.

Of course, neither is the case. Ms Pipes just chooses to ignore facts that run counter to her ideology in favor of made-up conclusions based on nothing more than her ideology. .

Shame on you Forbes.  Your corner of the mainstream media is indeed in decline.

Pharmacy pricing up – driven by brands

Prices for brand drugs were up 13 percent in Q3 2012 from Q3 2011, while generic prices actually decreased 21 percent.  

That’s the headline from Express Scripts’ just-released drug trends report, which attributes the huge price increase to brand manufacturers seeking to maximize profits before their popular drugs’ patents expire. The good news is increased generic utilization helped keep total drug costs relatively flat.

Several specific drugs saw even larger increases.  Drugs to treat Hepatitis C (not uncommon in workers’ comp, especially for health care workers) had the largest specialty spend increase, 117 percent.

To give you a frame of reference, ESI’s total annual drug spend is slightly more than $800 per person.

Utilization was up 0.7%, while prices (overall) increased 2.8%.  Combining utilization and price produces cost trend.

A quarter of drug costs are for antidepressants and mental/neuro disorder medications.

Notably, opioids and narcotics represent a very small percentage of ESI’s total spend, which is based on group health, medicare, medicaid, and other lines.

Niches in work comp medical management

Reflecting back on the Vegas comp conference (perhaps the best one in recent memory), what struck me most was the significant increase in companies focused on seemingly ever-smaller niches in the medical management space.

Perhaps it’s partially driven by the rather stunning success of MSC after they dumped their pharmacy business, along with the growth of MSA firms (and all their sub-species); MedRisk, Align, and PBMs; the acquisitions of transportation and translation firms, dental specialists, and imaging companies; and the sudden (!) understanding that pain management is really, really important in work comp.

Regardless, I must’ve picked up a dozen business cards from various individuals who are investing/starting companies/focusing/seeing opportunity in various niche areas, including dental, pain management, addiction/dependence, imaging, DME, IMEs, and home health.  Some were pretty/very sharp, with tight understanding and deep knowledge, while others just had an idea and had little idea of what to do or how to do it or who would pay for it or what they’d pay – but gosh, there sure is an opportunity!

While there’s no doubt there are lots of opportunities, there’s even less doubt turning opportunities into revenue is a very tough slog requiring discipline and tight focus.  Here, in no particular order, are a few recommendations/observations about building a niche business.

1.  No one cares about your company or you or your idea.  They really don’t.  What they DO care about is their personal individual unique pain point – that’s what’s important to them. Don’t waste their time with descriptions of your business.  If you can address their specific pain point, you have an opportunity.

2.  Listen don’t talk.  Ask don’t tell.  When in doubt, ask it again. Figure out exactly what their issue is, how it relates to your solution, then ask what their opinion is.

3.  Lunch is not business.  A meeting is not progress.  A contract is not meaningful.  What is meaningful is revenue, services delivered, bills sent and paid.  Don’t get caught up in having meetings.

4.  There are lots of reasons potential buyers will use bigger, more established companies, most of them quite reasonable.  If you are to succeed, there has to be a compelling, customer-centric reason for a prospect to use your’s.  You can’t be as good as, you have to be better – with better defined by that individual prospect.

5. While niche companies can – and usually do – a much better job addressing the specific service area that is their focus, often that area is so small that a big reduction in cost won’t move the proverbial needle.  Drugs are about 12-14% of spend, PT about the same, imaging around 5%, DME and home health a few percent each, and transportation and translation perhaps a point or so each.  Saving a payer 20% on their DME isn’t going to be meaningful in terms of the combined ratio, but it may be very meaningful for the individual at the payer tasked with addressing that area.  But she can’t solve her problem unless your solution can actually be implemented and used.

 

Employers in Illinois have much to be thankful for

As of yesterday, employers won’t have to pay outrageously inflated prices for drugs dispensed to their injured employers.  Until the legislature approved regulations capping drug prices for repackaged drugs, employers’ workers comp drug costs had been increasing at an astounding rate.

The regs now require insurers to base reimbursement for physician dispensed repackaged drugs on the price of the drug before it was repackaged.  Here’s the new language as published in the Illinois Register:

“If a prescription has been repackaged, the Average Wholesale Price used to determine the maximum reimbursement shall be the Average Wholesale Price for the underlying drug product, as identified by its National Drug Code from the original labeler.”

A big win to be sure, as physician dispensing companies, their investors and enablers were making millions in Illinois doing little more than taking pills from one bottle and putting them into another. The result? In Illinois, costs for physician dispensed drugs went up more than twice as fast as the number of scripts, because physicians dispensing medications raised their prices dramatically. According to a WCRI study, while the price of Vicodin purchased at a retail pharmacy dropped 2 percent over a year, physician dispensed Vicodin went up 66% over that three-year period.

I won’t get into how employers were able to defeat the efforts of physician dispensers, their investors and enablers to stop the new regulation except to acknowledge this would not have happened without

Lest we get too complacent, realize this is but one state out of 50. The repackagers and their enablers will continue their efforts in Florida, Hawai’i, Michigan, and everywhere else to keep sucking money out of employers and taxpayers to pay big dividends to private equity firms, buy corporate jets and fancy cars.

For now, congratulations to the good guys.  Then back to work on Monday.

Compounding pharmacies – it’s not just about steroid deaths

An excellent piece by a couple gentlemen from Liberty Mutual describes the myriad problems with and risks of compounding medications – over and above the disastrous faulty steriods from the New England Compounding Center.

A few highlights:

  • “oversight of compound medicines actually is minimal…And as with any industry that has minimal regulation and oversight, there is great potential for fraud and abuse. The lure of possibly significant profits also is helping drive this fraud trend.”
  • “these drugs do not use the standard national drug codes (NDC). This lack of a standardized coding allows unscrupulous providers to easily double bill payers for the same medication. Also, the absence of NDC codes generally does not allow for payers or administrators to apply drug utilization edits to incoming compounded bills.”
  • “The FDA does not require pharmacies to report adverse events associated with compounded drugs. Based on voluntary reporting, media reports, and other sources, the FDA has become aware of over 200 adverse events involving 71 compounded products since about 1990.”

There’s much more at the link.

Thanks to Sarah Sellers, PharmD, for the tip.

Comorbidities double workers’ comp claims costs

Claimants with comorbidities [health issues identified by the treating doc] cost a lot more than patients without.

That’s the conclusion of NCCI’s latest report, and a finding all workers’ comp stakeholders would do well to consider carefully – for several reasons.

1.  The percentage of working-age Americans with chronic conditions [e.g. asthma, hypertension, depression, diabetes, etc] is large and increasing.  According to the CDC, 27 percent of Americans are obese, 29 percent have hypertension, and 7 percent have diabetes.  All are substantially higher than a decade ago.

2.  NCCI’s analysis only included claimants where the WC treating physician coded and billed for a comorbidity.  Compared to the CDC figures, this occurred in about 10% of the patients who likely had comorbidities.

3.  The “growth rate of workers compensation claims with a comorbidity diagnosis is outpacing growth rates of the given conditions in the US population.” NCCI had a couple potential explanations for this trend; I’d suggest it is likely because many WC claimants:

a) don’t have health insurance;

b) their comorbidities are hampering their recovery from the occupational injury;

c) treating docs must address those comorbidities if there’s any chance of getting the claimant back to functionality; and

d) payers are paying for that treatment because it makes financial sense to do so.

One rather stunning finding – 81% of claims with diagnoses of obesity incurred lost time.

I’d be remiss if I didn’t note that the rollout of Obamacare will cover millions more claimants, thereby allowing work comp payers to send bills for non-occ conditions to the employee’s health insurer.  While some states continue to resist reform, there are others (e.g. Florida) that have decided to participate after all.

What does this mean for you?

Healthier workers = lower workers comp costs.

Physicians with more experience = lower costs

Health Affairs reported this week something most of us sort of “knew”; the more experience a physician has, the lower their patients’ health care costs are. 

Here’s the money quote:

“…physicians with fewer than ten years of experience had 13.2 percent higher overall costs than physicians with forty or more years of experience. [emphasis added] We found no association between costs and other physician characteristics, such as having had malpractice claims or disciplinary actions, board certification status, and the size of the group in which the physician practices.”

CWCI performed an analysis ten years ago [Does Practice Make Perfect?] that looked at the volume of workers comp cases handled by physicians over an eight year period.  Alex Swedlow and Laura Gardner MD’s research clearly showed a strong correlation between experience and outcomes.  The more workers’ comp patients a doc had, the lower the litigation rate, disability duration, indemnity and medical expense; pretty much every indicator was better. While the two studies aren’t directly comparable, the overarching lesson is the same:

The more experience a provider has, the better the outcomes are.

Of course, this is a generalization; there are older docs who are quite costly, and younger docs with terrific outcomes.  That said, if you’re looking to identify providers associated with better outcomes, those of us with grey hair (or little hair) may be a good place to start.

And yes, the older I get, the more accurate I find this correlation!

The cost of Obamacare – 14 cents per pizza…

Papa John’s Pizza founder and CEO John Schnatter said he’s going to have to raise the price of his pizzas by 10 to 14 cents to cover the added cost of complying with Obamacare’s provisions. (turns out it’s only 3.4 to 4.6 cents per pie…)

Let’s think about that.  Fourteen cents a pizza gets all of his employees excellent health coverage (only about a third are covered now, even though Schnatter says he’d “like” to cover all of them….)  This isn’t to slam Schnatter, who by all accounts is a decent guy who raises money for worthy causes and tries to stay out of public politics.  He does get a bit too aggressive in his marketing efforts, but hey, that’s not the worst thing in the world.

Rather my concern is Schnatter’s perspective – which is consistent with what we’ve heard from other chain food outfits – is myopic – in several ways.

If his company doesn’t provide insurance for his low-paid workers, we taxpayers have to.  That’s the way Obamacare works; folks with incomes below 400% of the FPL (federal poverty level) can get subsidized coverage).  So, if Schnatter cuts his workers’ hours so he doesn’t have to insure them, all of us taxpayers get to pay for their health insurance.  Schnatter is avoiding his responsibility and increasing our tax burden.

Sure, you can protest that you don’t believe in/like Obamacare for whatever reason, but you don’t get to pick and choose where your tax dollars go.  I don’t like paying for subsidies for corn ethanol or grazing rights in Wyoming or all-but-useless medications for seniors or pointless and stupid wars, but “elections have consequences” (yes, that’s two Karl Rove quotes in less than a week…).

There’s a widely held belief that workers without health insurance file claims with workers comp if they get hurt off the job.  Overall, this doesn’t seem to be the case, but there’s no doubt individual workers do try this, and some are successful.  Thus Schnatter’s position may lead to increased workers comp costs, however slight.

Finally, as long as he’s stuck with Obamacare’s coverage requirements, there’s this marketing angle – “you should buy Papa John’s because out pizzas are better than anyone else’s, because our people are happy and healthy.  And we take care of our workers, not like those schmoes at (pick a rival pizza company).”

Texas’ work comp reforms – quick takes

WCRI just released an assessment of the results of work comp reform in Texas, and – generally speaking – they are pretty positive.

Here are a few highlights; the complete report can be purchased here.

  • Costs per claim dropped 4 percent in 2010, driven by a 6 percent decrease in temporary disability duration and 2 percent decline in medical payments.
  • While WCRI’s research indicated most states’ costs declined or were stable, Texas’ dropped “more than most.”
  • Prices for non-hospital services increased after January 1, 2011 – likely driven by the elimination of so-called “voluntary networks”.
  • The growth in employment in the Lone Star State likely helped keep costs down.
  • Medical cost containment expense trend declined in 2010, however costs are still high at $3600 per claims.  Looks like the increased volume of UR post-2006 was a significant contributor to those costs.

It’s too early to tell how much of an impact will result from the changes in opioid prescribing (driven by the closed formulary), but I’d bet we’ll see lower medical costs and a significant decrease in temporary disability as well.  However, the real impact will not be felt for some time – and that will be a reduction in permanent disability.

What does this mean for you?

Macro factors – e.g. the improving economy – significantly affect workers comp.

Reforms can drive better results.  They can also increase some costs – as we’ve seen in Texas with UR.