Ohio: Study finds comp bureau lost millions from pharmacy program

The Ohio Bureau of Workers' Compensation lost millions in potential rebates from drug manufacturers under is pharmacy benefit program, according to a state investigation.

Late last year, the Ohio Inspector General's Office initiated an investigation to determine what, if any, corrective measures had been taken by the BWC as a result of the its own 2007 internal audit report which outlined various internal control weaknesses on the part of bureau's management and its pharmacy benefit manager, ACS State Healthcare. After conducting a preliminary investigation, Ohio Inspector General Thomas P. Charles said the BWC had taken action to remedy most of the critical issues outlined in the report. However, officials said they identified two areas of concern that warranted further investigation -- the BWC's failure to pursue available drug manufacturer rebates and the agency's delay in terminating payments for three costly medications.

The inspector general's investigation revealed that the bureau's management initially intended to pursue rebates from drug manufacturers in 2005. However, the report found that due to the belief that there was little opportunity to recover any significant savings, the BWC did not being pursuing the rebates until December 2008. During that three year period, the investigation found that the BWC missed opportunities to recover more than $14.5 million in rebates. Late last year, the bureau contracted with a rebate administrator vendor who has since collected approximately $3 million in rebates, and agency officials said they intend to pursue recovery of these rebates in the future.

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The report also noted that the BWC took more than eight months to implement policies to limit payments for three costly drugs. In 2006, the BWC became aware that those drugs were being prescribed and dispensed to injured workers for treatment of conditions other than those recognized by the U.S. Food and Drug Administration. In late 2007, the bureau approved a policy that it said would substantially restrict payments for those medications. However, the investigation determined that the BWC could have fully implemented these changes by April 1, 2008, but did not do so until five months later. During this period, the report found that the BWC paid more than $5.5 million for those medications.

Marsha Ryan, administrator of the BWC, said the agency recognized that there were problems with the program.

"When this administration arrived at BWC in mid-2007, we found a pharmacy program in disarray and suffering from severe neglect," she said. "Since 2007, substantive and efficient pharmacy reform has occurred. We commissioned a complete study of the program, made improvements where they were desperately needed and added leadership and staff. I am confident the care we have administered to the pharmacy program over the past two years is providing efficient service to Ohio's injured workers."

Ryan touted several changes to the program that have since been implemented, including the addition of a pharmacy program director and new medical director.

The Ohio Inspector General's Office has asked the BWC to respond within 60 days with a plan for how its recommendations can be implemented to further improve the program.

Board lowers discounts. The BWC's board of directors also recently lowered the maximum discount for group-rated employers. The new credibility table will reduce the maximum discount from 77 percent to 65 percent, effective July 1, 2010. The revision also lowered the minimum qualification for experience adjustments, an action that officials said will positively impact the rates of smaller employers with strong safety records.

The BWC's rate reform efforts were set in motion by changes enacted by House Bill 100, which was passed in June 2007. The legislation required a comprehensive study of the bureau's rate setting methods, including the group rating program. Ryan said the action is part of the board's multi-year plan to bring stability, fairness and equity to all employers.

In addition, the board approved modifications to the break-even factor, which was established in April. The break-even factor adjusts the discount level based on the overall risk of the group to ensure its premiums reflect their risk. Ryan said this is a crucial component of rate reform because it brings the premium paid by group-rated employers more in line with their claim costs, while still allowing the BWC to continue offering significant group discounts.

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December 3, 2009

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