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One effective way to meet that challenge is to use a pharmacy benefits management (PBM) provider. Using a PBM can be very effective, but it can be even more effective if a PBM is able to deliver a clear, concise scorecard of how it is helping its clients--insurance carriers, third party administrators and self-insured employers--successfully achieve that delicate balancing act.

"Making the right decision on compensability is extremely important, as an erroneously approved drug will cost a payer, on average, over $1,400 annually," says Jason Winters, RPh, MBA, business development manager, at Progressive Medical Inc, a PBM in Columbus, Ohio. "But just as important is knowing that your PBM is delivering results, and providing the data to demonstrate those results."

"Our analysis examines changes in drug spending on workers' compensation claims from 2008 to 2009 for Progressive Medical clients only, as well as the factors that may influence future expenditures," Winters explains. "It segments these factors into three distinct categories to paint a clear picture of the reasons for year-over-year drug spending changes."

Winters outlines those three categories as:

Price Changes--Examines only the net effect of changes in Average Wholesale Price (AWP), the current industry-accepted price benchmark for workers' compensation, while holding drug utilization and product mix constant.

Utilization Changes--For purposes of the Progressive analysis, the effect of changes in drug use per injured party was isolated, using the total days of supply of prescription drugs used per injured party per year as the measure

Changes in Product Mix--Shifts are reflected through changes in generic availability and utilization, spending on new medications, and fluctuations in usage within and across drug classes.

Looking over the key drug spending change factors from 2008-2009, Winters notes that it is important to base the year-over-year effect of price changes on drug spending on the actual mix of drugs sold in workers' compensation. He explains that this is because prescription drug use for work-related injuries is distributed much differently than other types of health conditions.

"As opposed to other sectors of healthcare, workers' compensation tends to see a much heavier concentration of spending in just the top few drug categories," he says. For example, AWP inflation on narcotic analgesics would have almost 10 times the impact on workers' compensation drug spending as it would on drug spending in the group health market.

In order to solely examine the impact of rising per-unit drug prices as a component of drug spending, the exact drug items sold in 2008 were recalculated at 2009 AWP. The net result is that for Progressive customers, AWP inflation accounted for an 8.1% increase in the list prices of brand name drugs and a 0.2% increase in the list prices of generic drugs. Since 63% of workers' compensation medication expenses are for brand name drugs, the blended AWP inflation rate was 5.2%.

As for changes in utilization, in 2009 Progressive Medical data demonstrated the average injured party obtained a total of 281-day supply of prescription medication, versus a 274-day supply in 2008--a 2.6% increase. Winters notes that while the number of days supply dispensed per prescription decreased by 1.5%, prescriptions per injured party increased 4.2%.

"This accounts for the overall increase in total days of supply received," he says. "Yet, despite the increase in total number days of medication supply, there was a net overall reduction in drug spending per injured party in 2009."

The following demonstrates reasons for changes in product mix from 2008 to 2009, and the corresponding impact on drug spending per injured party:

-- 1.2% reduction as a result of an increase in generic drug substitution for their chemically-equivalent brand name versions

-- An 8.7% reduction due to an overall shift to different, less expensive drugs. This could indicate a shift from a brand name drug to a less expensive brand name drug or from a brand name drug to a less expensive, chemically-different generic product.

-- An 0.4% increase from spending on brand name drugs newly released in 2009

Generic Drugs: Continuing progress

Turning to generic drugs, Progressive's fill rate for generic workers' compensation prescription drugs has increased steadily since 2005, when it was 62%. In 2009, the generic utilization increased to 68.6% from 67.2% in 2008.

According to Winters, this positive trend was driven largely by increased substitution of generic medications for their chemically equivalent brand name versions. In fact, the percentage of prescriptions written with an available generic equivalent increased from 2008 to 2009 (71.9% vs. 72.5%, respectively). And when generics were available for a given drug, the generic substitution rate increased from 93.4% in 2008 to 94.6% in 2009.

"Generic drugs, at an average of less than one-third the price of brand name drugs, are helping to restrain rising prescription costs," Winters says. "The net effect of increased use of generics overall from 2008 to 2009 is a two percent reduction of total drug spending."

Even more than the success using generics, Winters says that a constant theme throughout the Progressive analysis of the top drugs is a movement away from the more expensive products dispensed in 2008. In fact, he says, 14 of the top 25 drugs show a decrease in spending per injured party from 2008 to 2009.

"This follows a similar trend seen in our 2007-2008 analysis and can once again be attributed to factors such as aggressive drug utilization review and increased awareness of the dangers of narcotic overuse," Winters says.

Narcotic analgesics: Costs down again

For the second consecutive year, narcotic analgesics dropped a percentage in total drug spending. Narcotic analgesics comprised 34.8%, 34.1% and 33.6% of total drug spending for 2007, 2008 and 2009, respectively.

Among the trends for significant drugs within this class, OxyContin (oxycodone extended release) scripts per injured party showed a reduction for the second year in a row (-3.4% in 2009, -6.9% in 2008), Winters warns that there are a few reasons why optimism surrounding decreased OxyContin use should be tempered.

For example, as a result of the most recent court ruling upholding Purdue's patent rights and the creation of an end date for further production of generics, there are much fewer generics available in the supply chain.

"Last year's reduction in generics counteracted almost all of the positive effect of the reduction in OxyContin prescriptions filled per injured party," Winters explains.

Also, indicated by their labeling for only the treatment of cancer-related pain, and costing an average of more than $2,300 for a one month supply, oral fentanyl preparations Actiq (fentanyl citrate) and Fentora, which are very potent, have been among the top 20 drugs for workers' compensation payers for years. After a 14% reduction in prescriptions per injured party from 2007 to 2008 for Progressive, the company experienced a further reduction of 28% from 2008 to 2009.

"The reduction in oral fentanyl usage for 2009 single-handedly reduced total drug spending by 1.1%," Winters says.

Looking ahead, the Progressive analysis also provided clients with a look at significant future issues and trends for workers' compensation payers, including Out of Network solutions, abuse-deterrent narcotic analgesics and Risk Evaluation and Mitigation strategies (REMs).

"We tried to deliver as thorough an analysis as possible," Winters says. "The idea is to give our clients a snapshot of the past year, so they can get a good idea of why prescription drugs are such a critical factor in overall medical spending for workers compensation."

For more information or to obtain a copy of the Progressive Medical 2010 Workers' Compensation Drug Spend Analysis, contact marketing@progressive-medical.com or visit us at RIMS 2010 in booth #1640.

(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/.)

April 21, 2010

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