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.


Work comp medical, OneCall, and the future of workers’ comp

Something struck me during the bloggers speak session on Thursday – at a time when medical costs are heading up, driven by over-utilization, opioids, crappy networks, and percentage-of-savings-based networks, there are few medical experts in positions of real authority in claims organizations – much less leading those claim organizations.

Even more revealing, the medical directors at most (but not all) payers have little real authority.  Work comp payers are mostly run by men (mostly) with backgrounds in claims, underwriting/actuarial or finance. Sure, many are highly experienced and very well seasoned, but they’re fighting the last war – the one where indemnity was the enemy.

That’s no longer the case, hasn’t been for some time, and most certainly will not be in the future when medical accounts for 70% of claims costs. What we have is an industry where claims doesn’t adequately consider medical – which is understandable because the top guy is a former claims guy.

They see the world as it was back in the day, not as it is today. A piece on military leadership by Thomas Ricks is worth quoting:

“in Iraq: our military commanders focused on planning the 2003 invasion but virtually ignored the task of planning for what might happen during the long occupation that followed. Though it was clear, almost from the start, that our round-’em-up approach to the insurgency wasn’t working and that using heavy firepower in the effort was counterproductive…

Why weren’t our troops better prepared for the challenges of protecting civilians from resistance fighters, interrogating suspected insurgents and detaining enemy fighters?…The stakes of not finding out are great — for while we know we have a strong military, we truly don’t know if we have the right one for the conflicts we may face during the next two decades.

That was the discovery the British made — the hard way — in the Second World War. On the eve of the war, the Royal Navy was the biggest in the world, but Britain’s military leaders did not understand that the aircraft carrier and the submarine had drastically changed the nature of maritime conflict.” [emphasis added]

Most payers and claims organizations are built for and managed to “fight the last war”, one where indemnity was the enemy.  Yes, some few the rare “claims guy” does “get” medical – but most don’t.

Outsiders get this, and that’s why there were a plethora of private equity folks and related people circulating around the exhibit floor and attending sessions. There are a couple three (and that’s only the ones I know about) deals currently in process and lots of rumors flying around about others. Smart people see the opportunity created by this situation, and are moving quickly to position themselves to profit from others’ myopia.

As proof, some may not realize that Coventry is no longer the largest (measured by revenue) WC managed care company.  OneCall/MSC is.  Yes, OneCall does seem to be buying up everything, but it doesn’t take a genius to figure out they’ve figured out where the future opportunity is – managing medical for payers who can’t do it on their own.

Oh, and contrary to oft-repeated rumors, MedRisk is NOT being acquired – not by OneCall nor anyone else.  Lest you, dear reader, think I know not of what I speak, I promise to listen to Rush Limbaugh for an entire week if MedRisk does get bought.

PMSI isn’t on the block either.


Elections have consequences.  I don’t often quote Karl “Turd Blossom” Rove, but it certainly seems apropos now, three days after an historic election.  There are a plethora of interesting story lines surrounding the election and the hows, whys, and whos thereof.  We’ll keep our focus on those related to health policy, the impact on reform, and let the experts opine.

First out of the blocks is Bob Laszewski with his post listing some of the major health policy issues facing the President and Congress. Included among the challenges is addressing the fiscal cliff – I’m not as optimistic about our “leaders'” ability to get that fixed anytime soon.

Health Affairs’ contribution comes from Tim Jost, “Election 2012: A Win For Health Reform, But Much Work Remains” gets a bit more specific; “November 6 was a good night for health care reform, and for the millions of Americans who will benefit from it, but a great deal of work needs to be done before reform becomes a reality.  It is time for the administration to roll up its sleeves and get to work,” Tim says. He describes the areas where  important guidance and rules are promptly necessary to implement the Affordable Care Act, and he also points out continuing threats to the ACA such as challenges to the preventive services contraception mandate and premium tax credits on the federal exchanges, as well as the looming deficit reduction negotiations. We’ve less than 14 months till this thing fully kicks in, and time’s awasting.

The estimable Maggie Mahar explores the demographics of the vote in “The Nation is Divided, Not between Whites and Minorities, but between the Past and the Future. “ She sees this as a victory by the future population over the past. Maggie’s take is that “Women, minorities, and young people re-elected President Obama…This is not to say that, going forward white men will not also be in positions of power.”

Anthony Wright at Health Access blog is pretty darned excited about the result, and its implications for the nation’s largest (in population) state.  “A Great Night for California and for Health.” Anthony isn’t too giddy to remind us “this isn’t the end of the campaign, but the beginning of ACA implementation and the fiscal fight over Medicaid and Medicare.? 

Louise is one of our “battleground state” contributors and sends us via Colorado Health Insider a post responding to another’s recommendation that one can be “self-insured” if you’re careful enough.  Louise thinks not, saying “To be fair, I agree wholeheartedly with the tips he gives for “making health insurance a bad bet“.  Things like eating well, exercising, avoiding excess alcohol, not smoking, driving safely, managing stress, safe sex, not sharing needles, etc. are all great ideas.  They’re all things that our family does every day.  I’ve been told I’m a health nut, and I don’t shy away from the accusation.  I make green smoothies (kale and veggies and fruit all blended up – drink up!), exercise nearly every day and refuse to drive if I’ve had even a single glass of wine.  I fully plan on living to be a hundred.  But I would never ever go without health insurance for myself or my family.”

Fortunately, Obamacare (remember when that was a pejorative term?) includes wellness and prevention benefits; new contributor Chuck Smith at has several posts lauding the benefits of pre-illness care.

John Goodman of the National Center for Policy Analysis contributes “Socialism Kills”, on the impact of “economic freedom” on population mortality. Actually, the research isn’t about socialism per se; rather John cites the libertarian Fraser and Cato Institutes as the source for underlying research on how “economic freedom” contributes to longevity.  I haven’t read the two studies, but I’m curious if those two august organizations factored in the impact of potentially confounding factors, such as the many wars in Africa, rapid rise in starvation in several countries, an deaths from disease.  Also wondering how the headline could possibly be true in the face of data indicating longevity in most European countries exceeds that in the good ol’ US.  In fact, as the only industrialized nation without universal health insurance, we rank behind every EU country in life expectancy – including Greece, Malta, Cyprus (my birthplace) – and even lower than Chile…

I take a different approach, looking at the implications of Obamacare for workers comp – and surprise some by opining that overall, it’s good news indeed.

There are a few folks out there looking at things other than reform and the election – thank goodness!

InsureBlog’s Bob Vineyard reports that more docs are beginning to shun insurance in favor of cash, and explains why.

Dr Roy Poses continues his tireless pursuit of profiteers, this time going after the cozy relationships existing in the medical-publishing industry.

In Marketers’ Systemic Influence over Ostensibly Scholarly, Peer-Reviewed Publications: the Medtronic Infuse BMP-2 Example, Roy informs us:

A US Senate committee report detailed yet another example of how marketers working for industry (in this case, for Medtronic, a biotech/ medical device company) sought to systematically but covertly influence the ostensibly scholarly medical literature and the public discussion to sell more of their product…Those who advocate the evidence-based medicine approach, as I do, must not be naive about the extent that the evidence-base has been deliberately corrupted.  We need stronger measures to protect the integrity of clinical science.

Hospital Quality Reporting in Italy is the subject of Jason Shafrin’s post, wherein he discusses P.Re.Val.E Italy’s hospital quality initiative. Pretty comprehensive approach…

A change in Medicare policy will have a significant impact on post acute care (and home services). Brad Flansbaum digs into the details of a recent settlement between CMS and the Center for Medicare Advocacy.

The American Academy of Family Physicians is pushing back on nurse practitioners’ role in primary care. David Williams explains why they aren’t doing the same to specialists. Evidently the family practice docs are OK if specialists act as generalists, but oh no, not those nurses (disclosure, my daughter is a nurse..)

We wrap up this edition with a state-based discussion of workers comp reform; Tom Lynch of Workers’ Comp Insider offers “A Modest Proposal for New York” for fixing what’s wrong with the state’s workers’ comp system.

Finally, apologies as this, the post-election edition of Health Wonk Review is out a bit later than usual this week as I was in Las Vegas for the National Workers Comp Conference.  Fortunately, my fellow bloggers were able to keep up their writing to keep you, dear reader, fully abreast of the issues and implications thereof.