New York gets real
Bowing to the reality of the market, the New York Work Comp Board has issued a revised pharmacy fee schedule for workers comp.
The previous fee schedule based WC pharmacy fees on Medicaid - a linkage that was problematic for at least a dozen reasons. Here are the major ones.
1. Medicaid has 'positive enrollment' - members' eligibility is determined instantly, electronically. In WC, there is no upfront enrollment, therefore retail pharmacies don't know where to send the claim, or even if the claim has been accepted by an insurer. Work comp requires a lot of manual work, while Medicaid is electronic and instant.
2. The Medicaid reimbursement schedule has been a political football of late, as state legislators, under pressure from declining revenues and increasing service demands, have looked to cut Medicaid costs by cutting prices paid for drugs. California's decision to cut reimbursement by 10% has resulted in a political/judicial back and forth that is apparently still not resolved. By tying WC reimbursement to Medicaid, pharmacies, PBMs, and payers would be batted back and forth, not knowing from day to day what they should pay for drugs.
3. Medicaid has a formulary which reduces the cost of the drugs to the pharmacies. There is no such formulary in WC (except in a very few states such as Washington), and therefore drug manufacturers won't give discounts in return for preference in a therapeutic class.
4. The Medicaid FS is actually significantly lower than the contracted prices PBMs pay retail pharmacies. Thus there is no benefit to payers, or retail pharmacies, in working with PBMs. This despite the strong evidence that PBMs, properly implemented and managed, can dramatically reduce utilization (the volume of scripts dispensed).
What drove NY to make the change? Access issues. Claimants were not able to get their scripts filled as pharmacies could not afford to do so under Medicaid reimbursement, and PBMs could not afford to operate in the state while losing money on every script.
That's not to say the revised FS is much better. In fact, as the second lowest fee schedule in the nation, it represents an incremental improvement at best, and may not be sufficient to keep all stakeholders participating.
Cynics may point to California, and note that PBMs and pharmacies stayed in that market after the FS was based on Medicaid. True, but each state's Medicaid FS is unique, and CA's is significantly more reasonable than NY's.