Newsletter Sign-up

As one of the fastest growing components of healthcare costs in the United States, prescription drugs accounted for approximately 10 percent of healthcare expenditures in 2006.

"Prescription drugs are the fastest growing component of workers' comp medical expenses, yet they are the least managed part of medical expenditures," says Joseph Paduda, a principal at Health Strategy Associates, a Madison, Conn.-based consulting firm specializing in managed care and health cost containment.

In the workers' compensation arena, Rx drugs account for about 15 percent of workers' comp medical expenses--or $5 billion--according to Health Strategy Associates.

And claims severity is increasing significantly--particularly for claims that involve time away from work.

In fact, medical costs comprise almost 60 percent of workers' comp claims expenditures, reports HSA's Fourth Annual Survey Report on Prescription Drug Management in Workers' Compensation.

While price increases are a key contributor to drug cost increases, the most significant driver is utilization.

"As a result, we're seeing a significant increase in the number of entities, including workers' comp payers, TPAs and self-insured employers, trying to mitigate these expenses," says Paduda.

MITIGATION STRATEGIES

What are they doing to stem the cost onslaught?

One of the major ways in which payers are addressing these issues is through the use of pharmacy benefit managers, also known as PBMs. Since the early '90s, PBMs have emerged to focus specifically on the workers' comp industry. And a number of group health PBMs have developed integrated programs to address workers' comp cost concerns.

"PBMs can have a significant impact on prescription drug expenditures in workers' comp, largely due to their focus on managing both costs and utilization," says Paduda.

It was rising workers' comp prescription costs, for example, that prompted Larry Cowles, claims department manager at the Texas Association of Counties, in Austin, to look into the services of a workers' comp PBM in April 2001.

He turned to ScripNet, a Las Vegas-based workers' comp PBM, to streamline the delivery of prescriptions and ultimately control costs. TAC, a statewide, nonprofit trade association, purchases healthcare for more than 40,000 county employees.

So far, Cowles says he's pleased. "We have saved over $1 million in prescription drug costs since we began using the program, largely from the utilization of network pharmacies and the paperless, electronic processing of prescriptions."

The program operates similar to a group health prescription plan. For example, just like a group healthcare program, it uses prescription drug cards.

PBMs play a key role in cost control, says Dana Felthouse, president of the Pharmacy Benefit Management Institute in Scottsdale, Ariz. She says PBMs make sure the most effective drugs get to the patient.

She also says such programs can help direct patients to generic drugs, when medically appropriate, which helps curb the rate of drug cost increases.

"PBM information systems and point-of-service systems have become more sophisticated in recent years and are better able to support workers' comp concerns," she says.

She says the industry has also made big strides in eligibility verification, electronic claims adjudication, network contracting, formulary management, and drug utilization review programs. As a result, the programs are more effective at addressing payers' concerns.

While the focus on pharmacy network discounts below state fee schedules has been a primary concern of workers' comp PBMs, many have turned their attention to drug utilization review (DUR) and clinical management programs as a means of controlling costs.

"Most PBMs were originally focused on providing discounts to network payers to mitigate pharmacy costs," says Jim Andrews, vice president of pharmacy operations at Cypress Care, an Atlanta-based PBM focusing in the workers' comp, auto and Medicare Set-Aside markets. "We're now looking to manage pharmacy costs over and above network discounts, focusing on comprehensive clinical management that provides the right drug at the right time for the right price and ultimately gets people back to work."

Nick Page, vice president of pharmacy and clinical services at PMSI, a Tampa, Fla.-based workers' comp PBM and specialty medical services and equipment provider, says strong clinical programs lower utilization. That means lower medical costs and patients returning to work sooner.

"Clinical management programs can intervene with physicians, where appropriate, and encourage the sharing of information with physicians and pharmacists involved in patient care," he says.

For companies like Cigna/Intracorp, Aetna and Express Scripts, which manage pharmacy benefits on both the group health and workers' comp sides of the industry, access to integrated pharmacy data significantly enhances the DUR process.

In October 2006, Cigna introduced its Workers' Compensation Pharmacy Benefit Management solution, which combines Cigna Pharmacy Management's clinical pharmacy expertise with Intracorp's workers' comp medical management capabilities.

The resulting integrated DUR program houses both group health and workers' comp prescription claims in the same system. That provides a systematic review of drug use patterns and cost data.

"This allows us to mitigate patient health and safety issues and potentially more than double fee schedule savings by further reducing inappropriate drug use and fraud," says Betsy Robinson, assistant vice president, product management and development at Intracorp's Philadelphia office

"In order to be successful, you need to control both unit costs and utilization, says Robinson. "While controlling unit costs and providing network discounts can bring significant savings, you also need to look at point-of-sale opportunities at the retail/pharmacy level, which includes looking at the script before it's dispensed."

Capturing "first fill" data--prescriptions filled before a workers' comp claim has officially been filed--has been particularly difficult for PBMs.

In many cases, prescriptions are routed through third-party billers (TPBs), who purchase scripts from retail pharmacies and collect reimbursement from insurance companies and other payers.

TBPs survive on the margin between what they pay the retail pharmacy and what the insurer pays them and the relationship between PBMs and third-party billers has frequently been adversarial. As would be expected, many PBMs disagree with TPBs' fees and what they perceive to be the TPB's administrative inefficiencies.

Because TPBs capture scripts that have not yet been identified as belonging to a particular PBM or provider, a paper trail must often be created until the appropriate payer is located and a check is processed.

Aetna Workers' Comp Access, an integrated workers' comp pharmacy network introduced in January 2006, is looking to address the TPB/first-fill issue through a partnership with WorkingRx, a Salt Lake City-based third-party biller.

Under the agreement, AWCA and WorkingRX will share information so that prescriptions for eligible injured workers--especially those who may not yet be enrolled in AWCA's PBM program--can be matched to the program and their corresponding formulary sooner.

Faster identification of prescriptions means dollars saved earlier in the cycle due to improved formulary compliance, reduced paper billing, applied discounted pharmacy rates and other fee reductions.

"This relationship will help us get information into the managed program much faster through electronic communication," says Shawn Fisher, head of AWCA's strategy and business development, based in Hartford, Conn.

He says the program is able to apply formularies to unidentified scripts and as a result capture first-fill information sooner.

"In addition," says Fisher, "our integrated system links workers' comp pharmacy data with medical pharmacy data to help improve patient safety and prevent fraud and abuse. Through our direct relationships with pharmacies and physicians, along with our clinical initiatives, we're also able to affect utilization to provide the best care for the injured worker."

Express Scripts, a St. Louis-based company, is another PBM finding success in the group health market through its Express Comp program. Since 1992, Express Comp has provided workers' comp PBM services, with a specific focus on the safety and health of injured workers.

"The upward trend in workers' comp prescription costs comes at a time when the number of work-related accidents and injuries has actually declined," says Vickie Wheeler, senior director of workers' comp at Express Comp.

She says payers can save at least 20 percent to 25 percent on "hard" drug costs through network pharmacy discounts, as well as an additional 25 percent to 30 percent from the use of formularies and clinical programs.

MINDY TORAN lives in Pennsylvania.

October 15, 2007

Copyright 2007© LRP Publications