This will make you stop and think.

In 2012, the entire US opioid market was $8.34 billion.

Workers’ comp paid about 17% of that bill.

One of every six opioid dollars was spent by the work comp industry. 

That’s a stunning statistic.

Recall that workers’ comp medical expenses account for about 1.5% of total US medical spend.  Sure, there’s a lot of pain in comp – but there’s a lot of pain in non-comp diagnoses as well.  Chronic non-cancer pain, end-of-life pain treatment, cancer-related pain, acute injuries, surgical recovery, dental procedures can all result in opioid prescriptions.

But few group health patients get opioids for non-skeletal back pain.

What does this mean for you?

We’ve accomplished a good deal in reducing inappropriate prescribing of opioids to comp patients.

But we have very, very far to go.  This is NOT the time to rest on our rather meager laurels.


Workers’ comp pharmacy costs – Survey says…

CompPharma, a consortium of workers’ comp pharmacy benefit managers, released the 12th Annual Survey of Prescription Drug Management in Workers’ Comp yesterday.  The Survey is an in-depth look at the issue based on telephonic interviews with 21 TPAs, insurers, state funds, and self-insured employers.

This year, we (I’m the author of the study) found that drug costs increased across all respondents.  Comparing total 2013 and 2014 drug spend across all respondents, costs climbed 6.4%.

However, that increase was driven by a minority of respondents as only 7 of the 21 saw costs go up.

Looking at inflation another way, we also calculated the average increase for each respondent; trend was essentially flat.

We offer these different metrics to provide readers with as much data as possible so they can draw their own conclusions.  One could argue that you have to look at cost changes across an entire industry to really understand what’s happening.  Another perspective focuses on individual payers. As the payer’s policyholder base doesn’t change that much from year to year, a payer-specific view is more accurate.

The big question is what is driving drug spend increases.  In that, respondents’ views were pretty consistent – physician dispensing, opioids, and compounds.  I’d note that the industry has had some pretty good success addressing opioids; PBMs that report on this have all been able to decrease opioid spend over the past couple of years.

Another cost driver, mentioned by a couple respondents, was likely a major contributor: price inflation for generic medications.  Fortunately, that has leveled off somewhat of late, although entrepreneurs will continue to look for opportunities to make their fortunes by buying up manufacturers (of little-used drugs) and dramatically increasing prices.

A couple points that bear making.

First, work comp pharmacy is about as different from group health/medicaid/medicare as chalk and cheese.  There are:

  • no deductibles, copays, coinsurance, or other cost sharing for patients
  • wide-open choice of drugs except in TX OH WA and OK
  • most spend is for pain; 24% of dollars go for opioids while about 84% of spend is for pain

Second, the PBM industry has done a remarkable job of bringing down the rate of inflation over the last dozen years.  Yes, there have been a couple spikes over that time, but ten out of twelve years we have seen a ‘decrease in the rate of increase.”


California’s going to have a work comp drug formulary

And that is good news indeed.

WorkCompCentral reported this morning that the state legislature passed the enabling bill late yesterday; the Governor will sign it.

California will join four other states that have formularies in place today, and it is highly likely others will follow suit soon.

As good as that is, please do not make the all-too-common mistake of declaring victory and moving on.  The formulary bill is just the first step.  Here’s what has to happen to make a formulary actually work for all stakeholders.

  • UR – binding utilization review processes and rules that require compliance.  Otherwise you have speed limits with no police or laws to enforce them.
  • Flexibility – enable payers and PBMs to use rule-based processes and procedures to ensure patients get the drugs they need and aren’t dispensed drugs that may be harmful or counter-productive.
  • Specificity – blanket Y/N formularies are blunt instruments – allowing percocet for all claims just isn’t good medical care.  Instead, the formulary should be disease/condition/injury specific.
  • Timing – Texas’ phased-in rollout of their formulary made a lot of sense.  Handling new claims differently from legacy claims is appropriate and sensible.
  • Assessment – Monitor, track, and report on changes in prescribing and dispensing patterns, single out potential irregularities, identify problems and publicize same.  Fortunately, California has the best state-specific reporting and analysis entity; CWCI will be instrumental in this process.

What does this mean for you?

Wait…are we seeing actual progress in workers’ comp?  Hope springs once again!

Why have generic drug prices increased?

Over the last couple of years, generic prices increased rather substantially, spurring Congress to open an investigation after reports indicated retail pharmacy generic prices increased 37% over three months.  Congress is a bit late to the party, as it appears prices may be stabilizing after a rather dramatic run-up; more on that in a minute.

Generics make up about 80% of all drugs dispensed in the real world, and a slightly higher percentage in workers comp.

Usually, generic prices for specific drugs decrease over time.  The “usual pattern” changed about two years ago, when a popular and generally accurate price measure showed median generic prices were essentially flat over a twelve-month period ending in July 2014.  

More tellingly, the same assessment showed the average price increase for drugs that went up in price was almost twice as much as the average decrease for drugs with prices that dropped.

Of course, there’s a lot of variation among and between drugs.  Workers comp generic prices jumped from as much as 19% across the board according to TPA Broadspire.  And the largest work comp PBM, Helios, reported generic prices increased 10% in their most recent drug trend report.

So, what’s going on and why?

First, let’s stipulate that drug “price” is a very complicated term.  “price” is supposed to be what one pays for one unit of a service, or in this case, a good.

Things are a lot less clear in the world of drugs; there are many different pricing methodologies and definitions, all with pluses and minuses.  For our purposes, we’ll look at two generally-accepted metrics – AWP and NADAC.

AWP – known as “average wholesale price” or perhaps more accurately “ain’t what’s paid” is the price the drug’s manufacturer reports to the national drug price compendia – Medispan et al.  There is no auditing, no validation, no way to determine if an AWP actually reflects reality – and in many cases it doesn’t.

AWP is the basis for workers’ comp drug fee schedules in those states that have fee schedules.

NADAC is the national average drug acquisition cost, and is seen as a more accurate reflection of the real price buyers pay.

A shortage of some key drugs is a major contributor. Tetracycline and acetaminophen/ codeine drugs are among those in short supply; prices for tetracycline have exploded, up 7400% to 17,000% from 7/2103 to 7/2014.

There are anecdotal reports of shortages of chemicals needed to manufacture some drugs as well.

Some very old drugs have very few manufacturers.  Investors, seeing this as an opportunity, have snapped up companies making these drugs, consolidated the manufacturing, and gained pricing power.

Another reason for generic price inflation is a lack of competition among manufacturers.  The FDA has to approve new generics, and of late they’ve been quite backed up in their approval process for new generics.   In addition, there are reports that the FDA is loathe to approve many offshore drug manufacturers.  While this is in all likelihood due to significant concerns over processes and safety and other manufacturing and consumer protection issues, if many Indian manufacturers are not able to sell into the US, price competition suffers.

There’s also been significant consolidation among generic manufacturers, leading to fewer companies making specific drugs.  In turn, that means buyers have less success pitting one manufacturer against others.

Finally, my sense is drug manufacturers are raising prices for a simple reason – because they can.  With more Americans now covered by health insurance, there is a bigger market of buyers less concerned about price than they were before they had coverage.  And, there’s pent-up demand as people who needed but weren’t taking drugs now have access to those medications.

Recent price increases are no surprise to those who saw the same thing happen after Medicare Part D implementation; when seniors got their drug cards, the drug industry got a windfall.

Where next?

Of late, price increases have moderated significantly; about half of the generics increased in price (averaging 5.3%).  For those that declined in cost, the drop was almost the same at 5.1%.

I’d expect generic drug price inflation to continue to moderate; the FDA has committed to decreasing the approval backlog and new manufacturers will almost certainly see an opportunity, thereby adding suppliers.

Drug formularies and workers’ comp

There’s a LOT of activity around the country related to drug formularies.  Four states (OH OK TX and WA) have implemented formularies and at least 4 more are considering doing so (CA, ME, MT, TN). (AR was scheduled to do so this year but pulled back)

The “Why?” is obvious; the proliferation of opioids, inappropriate prescribing of other drugs (Soma(r)), exploding volume of compounding, and rampant off-label use of drugs is seen as a major problem in work comp.

The “What”, as in, what formulary to use, is demonstrably not obvious.

There are (roughly speaking) three varieties of formularies;

  • Open – pretty much any drug is available to anyone
  • Closed – a binary, or yes/no formulary that is drug-centric
  • Disease state/Condition-specific – formulary based on the underlying diagnosis and disease state (e.g. acute v chronic)

The closed formulary has some advantages – it is very simple and easy to understand, and from a regulatory perspective, administer and evaluate.

The closed formulary also has some rather significant issues.

  1. it starts with the drug, not the patient’s medical condition.  This strikes me as backwards; guidelines should ALWAYS begin with the diagnosis.
  2. problems arise when “Y” drugs are dispensed, paid by the PBM, then the payer determines the drug is for an unrelated condition. Think antihypertensives, insulin replacements or asthma meds.
  3. it does not differentiate between acute and chronic stages of a disease or condition; treatment can be quite different for these different stages.

What does this mean for you?

While the closed formulary is easy to explain, it’s a lot tougher to manage on the back end for payers, PBMs, and prescribers alike.

And, while I’m no clinician, allowing antihypertensives and duragesic patches without a prior auth no matter the diagnosis, while requiring a PA for benadryl does seem problematic. 

PDMPs – what they are and why you should care.

Prescription Drug Monitoring Programs are state-based databases containing patient, prescriber, and pharmacy-specific information on controlled substances.

49 states have PDMPs; the lone holdout is Missouri, due to a whack job legislator who’s totally unfounded worries about privacy are preventing the Show Me State from showing dangerous prescribing and dispensing.

There is little consistency among and between the states.  Some require docs and pharmacies to access the PDMP before prescribing/dispensing drugs while most do not.  Some have data on all controlled substances, others do not. Some are relatively easy to use, many are not.

As a result, while 72% of docs know about their state’s PDMP, only half regularly access it.

Fortunately, at long last the AMA has gotten behind PDMPs, and is promoting best practices (after it determines for itself what those best practices are).

The AMA’s committee members would be well served to immediately and extensively collaborate with Brandeis University’s PDMP Center for Excellence. The CoE is the nation’s leading authority on PDMPs, and recently recommended payers have access to prescribing and dispensing databases.

For those looking for information on practical experience with PDMPs, a session at the most recent Rx Drug Abuse Summit provided a solid overview of current limits and best practices.  These include:

  • PDMPs should include data on all controlled substances
  • prescribers and dispensers of controlled substances should check the PDMP before prescribing or dispensing these drugs.
  • PDMPs should push information to prescribers/dispensers when there is solid evidence of high-risk behavior
  • payers and PBMs should be able to access PDMPs as they are responsible for authorizing and processing scripts.
  • PDMPs should be “interoperable”; that is, they should share data across state lines.

The reason we need PDMPs is blindingly obvious – abuse is rampant and deadly.  Extensive research shows effective PDMPs are implemented, opioid abuse – and use – declines, and the adverse impact of opioids does too.

After hundreds of thousands of deaths from opioids; billions and billions of dollars wasted on drugs that, in many cases, do far more harm than good; and the unspeakable tragedy inflicted on families and society, we now know that opioid manufacturers’ insatiable drive for profits led some companies to outright lie about the consequences and costs.

Here’s a brief but chilling film using Purdue Pharma’s own video to damn the company.  

Later this week, I’ll report on how PDMPs can be made much easier to use, cheaper to implement, and far more effective.

What doe this mean for you?

If anyone asks if payers should have access to PDMP data, the answer is yes.

Drug testing explained – part 2

Yesterday’s post about testing work comp patients for opioids struck several nerves; perhaps the most sensitive involves frustration on the part of payers unhappy about paying for tests prescribed by docs who don’t read the results.

That and the outrageous prices charged – and paid – in some states by some labs/physicians.

In addition to several public commenters, I heard from two medical directors yesterday about docs who order tests and never take action when the results are “inconsistent” with expectations.  Over the last few weeks I’ve have had similar conversations with pharmacy directors at two large state funds.  Simply put, these folks are happy to promote best practices, but do NOT want to pay for tests that are never read.

What’s a payer to do?

First, watch the coding and reimbursement very carefully; your medical bill review function may be able to help identify inappropriate coding and/or coding that looks to be primarily reimbursement-driven.

Second, direct away from those providers engaged in unacceptable billing practices.  Yes, I understand you cannot force claimants to use or not use specific providers in some states.  I also know payers can encourage/recommend/channel/suggest/educate claimants about specific providers; Express Scripts had some solid results by educating patients about physician dispensing, and their lessons learned can inform your approach.

Third, make the high billers’ lives difficult by doing everything possible to reduce reimbursement; require medical necessity statements, require evidence that the test was actually done, reduce reimbursement by whatever legal means necessary.  I’ve talked to a couple payers who have successfully battled physician dispensers using this tactic; one roundtabled the issue with adjusters who came up with several very creative and effective ways to make life extremely difficult for companies billing for physician-dispensed drugs.

And the adjusters really enjoyed it…

For docs who don’t read the tests they have ordered, an outreach program wherein a test with aberrant findings triggers a case manager contact with the treating physician is in place at several payers.  While this – like everything else in workers’ comp – is no panacea, it does alert the treating doc that there’s a problem.

There is also technology available and currently in use that can determine if a document emailed to a recipient is opened.

Worst case, the payer can use this information if the claim goes to litigation, and/or to seek a change in physician, and/or to demonstrate culpability on the part of the physician if the patient has an adverse event.

What does this mean for you?

Drug tests are a tool; used correctly they can be very helpful.  But tests that are bought and never used are a waste of money. And using the wrong test is like trying to tighten a bolt with a hammer.

Drug testing (partially) explained

Once more we will delve into the minutiae of an issue…this time into testing patients who are prescribed opioids to ascertain if they are taking the prescribed medications, and if there is evidence they are consuming other licit and/or illicit drugs.

(full disclosure – Millennium Health, the largest toxicology testing company, is a consulting client)

All guidelines suggest/encourage/require testing of patients prescribed opioids.  

There are two types of urine drug tests – qualitative, where a cup test simply indicates if a drug is or is not present, and quantitative, which is much more accurate and must be done in a lab.

I’m surprised at the continued use of qualitative tests as they are notoriously unreliable; research indicates the cup test failed to show benzodiazepines were present for 28% of specimens, and cocaine for fully half of specimens evaluated – and false negatives and positives for other drugs are much higher than one would expect.  These “false negatives” are obviously misleading; the usefulness of cup tests is further compromised by how easy they are to fool. (there are about a gazillion web pages that provide info on passing a cup test…)

Say you are prescribed Oxycontin, but haven’t been taking the pills.  You’re scheduled for an office visit, have sold your pills, and don’t want to get caught.  You can rent pills to pass a pill count, and if you’re asked to pee in a cup, you can shave one of the pills into the cup, thereby adding the chemicals that will show you are compliant.
Voila!  you’re clean!

Except, if your sample gets sent to a lab for quantitative testing.  It is much harder to fool good lab testing because the testing equipment:

  • uses much lower cutoff levels for drugs, thereby finding more positives than cups do;
  • tests for metabolites – the chemicals created by your body after it processes the drugs: metabolites show you’ve actually taken the drug
  • checks for certain chemical markers that can indicate if the urine is fake or from another person (or, in some cases, another animal)

There’s much more to this; warning, if you start looking around on the web, you’ll find some incredible stories and myths and tales about folks allegedly passing tests; great for entertainment but very easy to become mesmerized for hours.

I recently reviewed data from a very large sample, specifically looking for data about cup results vs lab (quantitative) results.  The analysis was rather disturbing…Cup tests missed:

  • 45% of opiates (cup reported no opiates, lab reported opiates)
  • 44% of benzodiazepines
  • 28% of marijuana

Cup tests also indicate drugs are present when the lab tests show they are not, false positives occurred in:

  • 27% of reported opiates
  • 69% of antidepressants
  • 100% of PCP

What does this mean for you?

Be very careful about basing decisions on cup tests – even if they show there aren’t any anomalies or “unexpected” results.

Work comp drug trends; Coventry’s report

Coventry’s work comp PBM – First Script – released their drug trend review last week; they’ve taken a bit of a different tack than other PBMs, choosing to report broadly across all scripts while differentiating between “managed” (in-network retail/mail and contracted physician and clinic dispensed) and unmanaged scripts.  Note that Coventry reports on compounds separately.

The report is replete with infographics used to highlight cost trends, workflows and decision processes, charts and graphs which make it quite readable; specific data points and issues are easily located and understood.  Overall, the report is well laid-out and professionally done; as with other recent efforts (including CompPharma’s most recent PBM in WC Survey) drug trend reports have benefited greatly from the expertise of graphic designers.

Physician- and clinic-dispensed medications accounted for 5.1% of spend; retail/mail for about 69% of spend. Opioid dollars totaled about a third of total managed drug dollars.

Key cost drivers include an AWP increase of almost 10% across all drugs. That price increase was somewhat offset by a 5 percent decrease in utilization (7.4% for narcotics) which resulted in an overall cost-per-claim increase of 7.3%.

A key finding is a major increase in generic utilization and spending (mirrored by CompPharma’s soon-to-be-released 2015 report).  Generic spend was up a whopping 19.3% while single source brand spend dropped by 9%; generic forms of Cymbalta and Lidoderm helped drive generic utilization up over 5 percent.

Coventry reported a 4.1% decrease in short-acting (SA) narcotic script volume; long-acting dropped by 3.2%. Vicodin, the #1 prescribed drug, saw utilization drop almost 8%. Unfortunately higher AWP pricing for several common SA narcotics more than offset that decrease in units, driving overall SA narcotic spend up 8 points.

There are helpful statistics on utilization by drug class by age of claim; changes in specific drug spend and utilization year over year, details on what drugs saw the biggest changes in volume and price, charts illustrating various correlations between claim age and pharmacy, and details on compound utilization.

Notably, Terocin(c), a compound, accounts for more unmanaged spend than any other drug; the growth in all topical medications is quite remarkable. In total, compounds accounted for 7.7% of managed spend and 28.1% of unmanaged spend.

Coventry’s report is data-rich, and this is particularly illuminating in their in-depth analysis of compounds.  Trends in utilization and spend by state, claimant usage, and in-network v out-of-network are analyzed in depth.

What does this mean for you?

Compounds are growing rapidly, efforts to control narcotic utilization are bearing fruit, and generic price inflation remains problematic.

WC Rx Survey – early results are in…

We’ve finished collecting the data for CompPharma’s 12th (!) Annual Survey of Prescription Drug Management in Workers’ Comp;  working on compiling and analyzing the data now and expect to get the report out next week.

The survey uses both quantitative and qualitative questions; this enables us to track changes over time to key metrics including network penetration, mail order usage, generic efficiency, and compound drug growth.

The qualitative responses are really helpful in gaining an understanding of what’s keeping payers up at night, where they are seeing success, and how they view key issues.

Here are a few initial findings…

  • Drug management is viewed as more or much more important than other medical issues by 80% of respondents
  • 75% said drug costs will become more important over the next year
  • 2/3rds indicated compounds are the most concerning new issue in WC pharmacy

There’s a lot more analysis to be done as we dig into the qualitative responses. One key area will be the cost and quality control programs payers have implemented over the last 18 months and the results of those programs.

Once the final report is done and proofed, I’ll put up a link.

Public versions of the previous surveys are available free for download (no registration required) here.