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A research team with the Tampa, Fla.-based workers' comp PBM has produced a report that analyzes the key factors driving pharmacy costs. The report was compiled from data from more than 12 million PMSI workers' compensation pharmacy transactions between 2003 and 2007. The sheer magnitude of the study (it details the pharmacy use of more than 1.5 million injured workers) makes the trends revealed by it worth a closer look.

One of the report's most striking revelations is that state legislatures that pass laws mandating the use of generic medications over brand-name medications are fooling themselves if they think they are going to reduce pharmacy costs.

According to Maria Sciame, a PMSI director of clinical services and one of the contributing authors of the study, legal provisions that are allowing doctors to override state generic mandates are a major culprit.

"I really think that that is our sense ... that it's counterintuitive to have a generic mandate and the states with these mandates have a lower generic substitution, although not by a whole lot and their generic efficiency is just minimally higher than those that have no mandate," she said during a phone interview with Risk and Insurance®.

"So at first, it is perplexing, but when you look at the dynamics between the patient who knows that a generic is required in their state and the physician, physicians are writing for medically necessary and our sense is that they are doing that to appease the patient but not because it is medically necessary."

"Medically necessary" is a term meaning the doctor says his or her patient must have a particular drug by name.

Reform is coming on a state-by-state basis. Some states have their act together better than others. New York, the state that PMSI credits with being the most progressive in its efforts to control pharmacy costs, is also one of 13 states, including the District of Columbia, that PMSI lists as having the highest drug costs.

But elected officials in that state are continuing to behave proactively. In May, Gov. David Paterson launched a proposed law that would create stiffer disclosure rules for pharmacy benefits managers. The bill would force PBMs to disclose conflicts of interest with drug companies and would limit gifts to doctors from drug companies to no more than $50 per year. The New York governor's office, in a May news release, alleges that gifts to doctors from drug companies total in the billions.

Taken as a whole, the dynamic of generics versus brand-name drugs took an even more interesting turn this year. PMSI reports that, in 2007, the net increase in worker's comp prescription prices was 6.7 percent. The formula used to arrive at that amount is rather complex, but in part it can be explained by the 10 percent increase seen in the price of brand-name prescriptions and no increase in generics.

And this in a U.S. market where there is no medical difference at all between generic medications and their branded twins, PMSI executives said.

"It is really clear that the FDA requires pretty stringent testing of generics so that they have the same ingredient. They are all FDA approved before they can even come to market," Sciame said.

But what about the medication of pain? Who wants to take any kind of chance with a generic on not killing pain enough when a leg is broken in three places?

"Pain causes a lot of dysfunction. It is something immediate and present and disturbing to the patient, and if they perceive that in any way that they are going to get something that is maybe subpar or cheaper ... hey, we're Americans, we think, 'Cheaper or free, it's inferior quality," she said.

"I think it is more a push on the patient side, and unfortunately physicians are people too. And if they don't feel that it is a big deal, they go ahead and cave and write for medically necessary," she added

There are other equally priceless, or should we say pricey, lozenges in the 47-page PMSI report, but consider just this one additional point for now: Overall utilization of medications among PMSI clients experienced a 7.31 percent increase in 2007. Of that increase, about a quarter was due to an increase in the number of injured workers, while three-quarters was due to an increase in the number of medications used and the length of time that they were used for.

And what are the driving factors here? According to Sciame, they are an increasingly older workforce and more and more categories of drugs that are used in concert with other drugs.

"We all know that we are not going to retire at 65, we are all going to work until we are 70 or 80 with how things are going. And the older a person is when they have an injury, the harder it is for them to recover. A younger person will recover more quickly, an older person may not. They may have co-morbidities that can aggravate the effect of the injury so that is a mitigating factor," she said.

As interesting as the PMSI report is, Sciame said there is a dearth of reporting in the workers' compensation field as it relates to pharmaceuticals. One research shortfall, according to Sciame, is the overall impact the current use of additional categories of drugs is having on return-to-work statistics. The other is the impact these additional drug categories are having on overall pharmaceutical cost.

"We are seeing the evidence for these drugs individually, but do we know that by combining them we are getting better results than not. And I think that is an area where we are going to have additional research, not just in workers' comp but in healthcare in general," she said.

DAN REYNOLDS is senior editor of Risk & Insurance®.

August 1, 2008

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