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In recent years, two areas--compound drugs and drug repackaging--have gone hand-in-hand as two ways in which payers often have no idea exactly what they are paying for when it comes to prescription drugs and workers' compensation claims. But, by using technology anchored by a smart prescription processing strategy to help sort through these dual challenges, payers can boost patient care and control costs simultaneously.

As has been the case for the last several years, the average prescription cost of compounds in California, for example, is twice the national average while also being one of the largest producers. However, according to Healthesystems' data, the trend has been steadily increasing every year in other states.

As Corr explains it, a growing percentage of the providers dispensing compound drugs submit via paper, and many payers have had limited capabilities with adjudicating these bills at the appropriate or allowable rates. While the number of the compound drug paper bills is currently a small percentage of most national payers' overall prescription volume (less than 2 percent), the dollars associated with these transactions and the corresponding potential savings can be very high.

According to Corr, as with many workers' compensation laws, the state rules vary regarding how a payer can adjudicate these. For example, California's billing regulations require the providers (pharmacies, compound drug companies, physicians, etc.) to submit a detailed list of the individual ingredients in each compound prescription.

However, in many cases these bills are paid-in-full, since many PBM's either don't process paper bills or their pharmacy transaction processing systems are unable to adjudicate the multiple ingredients within a single compound drug prescription (while also being able to apply the state- specific cost calculations for each respective ingredient).

"In the end, the entire prescription can be paid by at least two to three times higher than the allowable amount of the individual ingredients," Corr says. "The situation also causes issues with performing the required state reporting for these transactions."

In addition to significantly overpaying, payers encounter other drug treatment and billing-related shortcomings /challenges when managing compound drugs. Some of the issues include:

--Double billing--compound drugs are not required to have nor do they use standard national drug code (NDC) numbers, and therefore it is difficult to identify when multiple fills for the same prescription are being provided. "It isn't uncommon for a patient to receive multiple fills of the same prescription," Corr says. "And in some cases, we have seen it happen on the same day, under different prescription numbers." In addition, sometimes the compound pharmacy companies also use different third-party biller names, further complicating a payer's ability to identify this type of situation.

--Drug interactions--since the individual ingredients of the compound drug are not captured as part of the prescription transaction within the claimant/patient profile, there is a high risk for potential drug interactions (adverse effects) or overdoses when other drugs in a patient's overall drug regimen are being combined with these compound prescriptions. In addition, the lack of NDC-level detail does not allow for drug utilization edits to occur on these transactions. The only way to solve this issue is to record and adjudicate each individual ingredient within the same pharmacy management system, using the same patient profile and applying the same clinical review edits and rules.

--Overbilling--occasionally the compound drug will include the use of higher priced brand name drug ingredients regardless of whether there is a generic alternative available. The lack of NDC detail within a pharmacy management system will not identify these types of issues. There is also a frequency of overbilling compared to the allowable compound production time billing rate (i.e. 40 minutes for milling which is usually performed by a machine, or 50 minutes to package the drugs into a jar and apply a label).

--Therapeutic duplication with different dosage forms--dispensing the same drug in oral and topical form and avoiding the appropriate drug utilization edits since they aren't using standard NDC numbers.

On the closely related repacking issue, it is very difficult for payers to receive accurate prices for repackaged medications, which, by definition, mean a pharmaceutical product is removed from the original container with an original NDC and put into a new container with new quantities, therefore requiring a new NDC, with a new repackaging company label and price for the medication. By its nature, the process can result in inaccurate and overpriced medications. In fact, on occasion Healthesystems has found dispensed compounds not including the billed compound's formulation.

Some states have been attempting to help payers manage the process better, after they have begun to understand the cost-control issues. In Arizona, for example, clarifying language on repackaged drugs allow reimbursement at the original labeler NDC, which is often far less than a repackaged NDC. The result will be claim savings to carriers and self-insureds in Arizona, without comprising the claimant's access to quality care.

Healthesystems is playing a role in helping many of the states make sense of this complex situation. At the Arizona Industrial Commission (ICA) stakeholder hearing last May, Healthesystems provided the ICA with data outlining the cost difference between repackaged drugs dispensed in an office setting versus medications distributed through retail/mail order pharmacies. In addition, Healthesystems supplied data illustrating how physician dispensing and drug compounds are areas of opportunity for cost control in workers' compensation.

According to Todd Pisciotti, Healthesystems' vice president of sales & marketing, the key to maximizing a pharmacy management program success is to capitalize on all the savings available and quickly address new trends like we are seeing with the troublesome and costly compounded and repackaged drugs.

"While rule changes over the past few years within states like California and Texas have added certain cost controls, due to the complexities involved with implementing these controls, many PBM's and payers are unable to fully capitalize and enforce them," Pisciotti says.

To combat that double-edged challenge, Healthesystems' pharmacy management system offers a proprietary prescription adjudication tool for managing paper compound and repackaged pharmacy bills, he explains.

"Using these tools, we can reduce the bills to the lowest allowable rates while maintaining full compliance with state rules, regulations and reporting requirements," Pisciotti says. "The process is optimized to work with the Healthesystems Paper Bill processing service whereby all bills (point-of-service, paper and mail order) are processed in the same adjudication system."

All drug utilization, drug plan and clinical edits ensure appropriate treatment protocols are being applied, while also incorporating an automated authorization and payment process necessary to facilitate appropriate transactions.

According to Healthesystems' Corr, aggressive management of both these types of drugs yields significant drug cost savings, but just as importantly, it also addresses other outlying claims costs contributors such as unnecessary medical treatment, non-compliant providers, and fraud.

"In the end, clients get an efficient, automated process that eliminates the need to manually process compound or repackaged bills, in addition to reducing bill review charges," Corr says. At the same time, Healthesystems' solutions maximize the savings on transactions that are occasionally billed at rates over 10 times the average wholesale price amount of a non-compounded drug formulation, for example.

"Our systems and tools ensure drug treatments maintain the same consistency and quality as provided throughout the other aspects of the pharmacy program," Corr says. "What's most amazing is that some payers don't even realize they are overpaying. But it's happening more and more."

Corr emphasizes that while reducing costs is important, of course, Healthesystems' strategy is not simply cost-driven.

"We don't just price medications appropriately for clients," he says. "We are also helping them maintain the patient's health with the best treatment."

"As long as we're looking out for the patient first, really truly trying to get the right drug for the treatment/injury to get them back to work, we're doing our job," Corr says. "Reducing claims costs is the other critical result."

For more information about Healthesystems, contact Todd Pisciotti at 813-769-5284 or tpisciotti@healthesystems.com.

(The above piece is part of our continuing Insights series designed to highlight key products and services to our readers. This paid-for Insights was written and edited by Risk & Insurance® on behalf of our marketing partner. Additional Insights can be found on our Web site at www.riskandinsurance.com/.)

September 30, 2009

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