Drug Trend Report: Costs Up, Usage Down
The introduction of new specialty medications, rising costs of compound medications, and an increase in the average wholesale price of oxycodone with acetaminophen are among the key drivers of pharmacy costs in the past year, according to Healthcare Solutions. The pharmacy benefit management company is the latest to issue a drug trend report based on in-network paid pharmacy transactions in a comparison of 2014 and 2013.
“In 2014, Healthcare Solutions’ book of business saw a 4.1 percent increase in the total pharmacy spend,” the company said. “This is attributable to an increase in the cost of prescription medications.”
The company reported an overall 8.6 percent price increase of prescription medications, including average wholesale price (AWP) increases of 12.5 percent for brand name drugs and 7.9 percent for generics. The increase in prices for generic drugs was “unexpected” following years of flat levels and the authors expect the increases to continue as newer medications come off patent.
“There were some significant inflationary factors regarding generic product pricing,” the report said. “One of the main contributors to the overall increase in spend was the AWP increase in hydrocodone with acetaminophen combination products.”
“The introduction of higher cost specialty medications will need to be monitored closely, as with the Hepatitis C medications” which came into the arena during 2014.
Last fall, the federal government changed hydrocodone combination products (HCPs) from a Schedule III to the more restrictive Schedule II, the authors noted. While the change has resulted in a “20 percent reduction” in the use of HCPs, “the manufacturers are now required to follow stricter guidance, management and label changes which resulted in an increase to the AWP for the medication.”
Utilization of pharmaceuticals among injured workers decreased by more than 3 percent, according to the report. Included was a reduction in the use of opioids.
“In relation to cost management, HCP price increases were offset by the gains in decreased utilization,” the report said. “The introduction of higher cost specialty medications will need to be monitored closely, as with the Hepatitis C medications” which came into the arena during 2014.
Payers who provide workers’ comp benefits to health care workers have been especially impacted by the rising costs of medications to treat hepatitis C, the authors reported. Each treatment can cost $100,000, and the trend is expected to continue.
Specialty medications that target large claimant populations are being developed. For example, Pfizer Inc. and Eli Lilly and Company are creating Tanezumab. Described as a “new, non-narcotic medication to treat chronic pain,” the drug “has the potential to offer an innovative treatment to help millions suffering from painful conditions.” However, the medication “may add a significant cost to payers who cover chronic pain claimants.”
Compound medications increased in terms of the “number, complexity and cost” in 2014, the report said. “In the past 4 years the average cost of compounds has escalated 225 percent.”
Breakthrough Testing Still in Need of Traction
If a workers’ compensation payer agreed to fund genetics testing to ensure an injured worker would actually benefit from prescribed medications, the simple cheek swab and lab test would cost about $700.
But according to three speakers who promoted genetics testing during the Risk and Insurance Management Society Inc.’s recent 2015 conference, these still-misunderstood tests could save countless more dollars and improve employee health.
They said the tests would map an individual’s genetic uniqueness to help doctors understand how well a patient would metabolize specific medications. That would further help doctors prescribe drugs most probable to be safe and effective for each patient.
Pharmacogentic testing (PGX) would eliminate the trial-and-error process doctors and patients currently practice when trying to find the right medication for patients who frequently react differently to specific drugs, the speakers said.
The current process delays effective therapeutic treatment and drives up costs when a prescribed drug doesn’t have the intended impact. Trial and error also endangers lives when costly and escalating drug regimens that don’t work eventually include prescriptions like opioids, which may harm certain patients or trigger addiction, according to these genetics testing proponents.
They see PGX becoming a “standard of care” and part of an overall march toward “personalized medicine.”
Only 50 percnt of patients currently respond positively to the medications they are prescribed.
Yet with few people who have actually participated in PGX and insurers still not paying for it, skepticism remains.
Fewer than a dozen people attended the RIMS conference session on PGX, including myself and another writer.
Was lack of interest due to 9 a.m. start time in New Orleans, a late-night party town? Or was it the employee and risk manager skepticism the speakers know must be overcome before the PGX takes off, as they expressed confidence it will?
“Even the physicians aren’t comfortable with it yet,” said Geralyn Datz, one of the speakers and director of Southern Behavioral Medicine Associates. A recent poll of thousands of doctors revealed that only 28 percent of them had “some comfort level” with the testing, Datz said.
Yet the speakers made some convincing arguments for PGX’s future.
The U.S. Food and Drug Administration currently recommends genetic testing for patients prescribed 160 different medications and 15 of those drugs are used in workers’ comp in “a major way,” said Kimberly George, a senior VP at Sedgwick Claims Management Services Inc.
Only 50 percent of patients currently respond positively to the medications they are prescribed, Datz said. She thinks consumers wanting more effective health care will eventually demand the testing.
Sonny Roshan, chairman and CEO of Aeon Clinical Laboratories, said the federal Centers for Medicare & Medicaid Services is a proponent of the testing, another reason the speakers expect its eventual adoption.
Roshan is also working with a large health insurer wanting to learn more about PGX.
The signs point to a potential that doctors will eventually consult PGX results before writing prescriptions for more workers’ comp patients. But it will also take more than just doctor and patient willingness to use the tests.
Claims adjusters, for example, will have learn of their benefits and claims payers will eventually demand to see return on investment documentation.
Detention Risks Grow for Traveling Employees
It used to be that most kidnapping events were driven by economic motives. The bad guys kidnapped corporate employees and then demanded a ransom.
These situations are always very dangerous and serious. But the bad guys’ profit motive helps ensure the safety of their hostages in order to collect a ransom.
Recently, an even more dangerous trend has emerged. Governments, insurgents and terrorist organizations are abducting employees not to make money, but to gain notoriety or for political reasons.
Without a ransom demand, an involuntarily confined person is referred to as ‘detained.’ Each detention event requires a specialized approach to try and negotiate the safe return of the hostage, depending on the ideology or motivation of the abductors.
And the risk is not just faced by global corporations but by companies of all sizes.
“The world is changing. We see many more occasions where governments are getting involved in detentions and insurgent/terrorist groups are growing in size and scope. It’s the right time for a discussion about detention risks.”
— Tom Dunlap, Assistant Vice President, Liberty International Underwriters (LIU)
“Practically any company with employees traveling abroad or operations overseas can be a target for a detention risk,” said Tom Dunlap, assistant vice president at Liberty International Underwriters (LIU). “Whether you are setting up a foreign operation, sourcing raw materials or equipment overseas, or trying to establish an overseas sales contract, people are traveling everywhere today for so many reasons.”
Emerging Threats Driven By New Groups Using New Tools
Many of the groups who pose the most dangerous detention threats are well versed in how to use the Internet and social media for PR, recruiting and communication. ISIS, for example, generates worldwide publicity with their gruesome videos that are distributed through multiple electronic channels.
Bad guys leverage their digital skills to identify companies and their employees who conduct business overseas. Corporate websites and personal social media often provide enough information to target employees who are working abroad.
And if executives are too well protected to abduct, these tools can also be used to identify and target family members who may be less well protected.
The explosion of new groups who pose the most dangerous risks are generally classified into three categories:
Insurgents – Detentions by these groups are most often intended to keep a government or humanitarian group from delivering services or aid to certain populations, usually in a specific territory, for political reasons. They also take hostages to make a political statement and, on occasion, will ask for a ransom.
In other cases, insurgent groups detain aid workers in order to provide the aid themselves (to win over locals to their cause). They also attempt prisoner swaps by offering to trade their hostages for prisoners held by the government.
The most dangerous groups include FARC (Colombia), ISIS (Syria and Iraq), Boko Haram (Nigeria), Taliban (Pakistan and Afghanistan) and Al Shabab (Somalia).
Governments – Often use detention as a way to hide illegal or suspect activities. In Iran, an American woman was working with Iranian professors to organize a cultural exchange program for Iranian students. Without notice, she was arrested and accused of subversion to overthrow the government. In a separate incident, a journalist was thrown in jail for not presenting proper credentials when he entered the country.
“Government allegations against detainees vary but in most cases are unfounded or untrue,” said Dunlap. “Often these detentions are attempts to prevent the monitoring of elections or conducting inspections.”
Even local city and town governments present an increased detention risk. In one recent case, a local manager of a foreign company was arrested in order to try and force a favorable settlement in a commercial dispute.
Ideology-driven terrorists – Extremist groups such as Boko Haram and ISIS are grabbing most of today’s headlines with their public displays of ultra-violence and unwillingness to compromise. The threat from these groups is particularly dangerous because their motives are based on pure ideology and, at the same time, they seek media exposure as a recruiting tool.
These groups don’t care who they abduct — journalist, aid worker, student or private employee – they just need hostages.
“The main idea here is to shock people and show how governments and businesses are powerless to protect their citizens and employees,” observed Dunlap.
Mitigating the Risks
Even if no ransom demands are made, an LIU kidnap and ransom policy will deliver benefits to employers and their employees encountering a detention scenario.
For instance, the policy provides a hostage’s family with salary continuation for the duration of their captivity. For a family who’s already dealing with the terror of abduction, ensuring financial stability is an important benefit.
In addition, coverage provides for security for the family if they, too, may be at risk. It also pays for travel and accommodations if the family, employees or consultants need to travel to the detention location. Then there are potential medical and psychological care costs for the employee when they are released as well as litigation defense costs for the company.
LIU coverage also includes expert consultant and response services from red24, a leading global crisis management assistance firm. Even without a ransom negotiation to manage, the services of expert consultants are vital.
“We have witnessed a marked increase in wrongful detentions involving the business traveler. In some regions of the world wrongful detentions are referred to as “business kidnappings.” The victim is often held against their will because of a business dispute. Assisting a client who falls victim to such a scheme requires an experienced crisis management consultant,” said Jack Cloonan, head of special risks for red24.
Without coverage, the fees for experienced consultants can run as high as $3,000 per day.
Given the growing threat, it is more important than ever to be well versed about the country your company is working in. Threats vary by region and country. For example, in some locales safety dictates to always call for a cab instead of hailing one off the street. And in other countries it is never safe to use public transportation.
LIU’s coverage includes thorough pre-travel services, which are free of charge. As part of that effort, LIU makes its crisis consultants available to collaborate with insureds on potential exposures ahead of time.
Every insured employee traveling or working overseas can access vital information from the red24 website. The site contains information on individual countries or regions and what a traveler needs to know in terms of security/safety threats, documents to help avoid detention, and even medical information about risks such as pandemics, etc.
“Anyone who is a risk manager, security director, CFO or an HR leader has to think about the detention issue when they are about to send people abroad or establish operations overseas,” Dunlap said. “The world is changing. We see many more occasions where governments are getting involved in detentions and insurgent/terrorist groups are growing in size and scope. It’s the right time for a discussion about detention risks.”
For more information about the benefits LIU kidnap and ransom policies offer, please visit the website or contact your broker.
Liberty International Underwriters is the marketing name for the broker-distributed specialty lines business operations of Liberty Mutual Insurance. Certain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. This literature is a summary only and does not include all terms, conditions, or exclusions of the coverage described. Please refer to the actual policy issued for complete details of coverage and exclusions.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty International Underwriters. The editorial staff of Risk & Insurance had no role in its preparation.