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By DAN REYNOLDS, senior editor of Risk & Insurance®

Unintended consequences are rife in workers' compensation reform and nowhere is that reaching a more painful pitch than in Texas, at least for pharmacy benefit managers.

"If you're looking for a legislative fix for something you are sometimes going to have to wait as long as 24 months," said Joe Paduda, president of CompPharma, a nine-member consortium of pharmacy benefit managers that includes Cypress Care, PMSI and Aetna Workers' Comp Access.

Considering how onerous the unintended consequences of workers' comp reform can be, maybe the slow pace of change in Texas is a good thing.

In 2005, Texas legislators passed House Bill 7 that called for the creation of certified healthcare networks for workers who were in the workers' comp system. Certify your network, the logic went, and regulators will have a grip on ensuring pricing transparency and quality of care.

Jump forward two years and take a peek at House Bill 473. The bill authorized insurance carriers to contract with what were referred to as "voluntary networks" to deliver workers' comp healthcare services, with the provision that this authorization would expire on Jan. 1, 2011.

Now here comes the tricky part. Are pharmacy benefit managers "voluntary networks" or not? If they are, under the law, then the hundreds of pharmacy benefit agreements between pharmacy benefit management companies and insurance carriers in Texas cold be facing a registration deadline, or risk being out of compliance.

House Bill 473 was passed in 2007, but it's only lately that it's been on the industry's radar.

"Most insurance carriers paid zero attention to it. I guess they thought it would go away or they didn't have good lobbyists or good connections," said Jane Stone, a partner with Austin, Texas-based Stone Laughlin & Swanson LLP, a Texas workers' comp specialist representing giants CNA, The Hartford, Liberty Mutual, and the third-party administrator ESIS Inc.

Bonnie Bruce, the chief of staff to state Rep. Burt Solomons, the Denton County Republican who championed both bills, said lawmakers left ample time between the passage of the 2007 bill and that January 2011 deadline. "No one came forward, there was nothing brought up last session," Bruce said.

Only recently has there been any discussion between legislators, carriers and pharmacy benefit managers about the bill's implications, said Jim Andrews, a senior vice president of pharmacy solutions with Atlanta-based Healthcare Solutions, the parent company of Cypress Care.

"You're right about the fact that it appears to be late in the day," Andrews said of discussions that have taken place over the last nine to 12 months. "But I don't think the carriers or the pharmacy benefit managers thought the provisions applied to them."

In fact, that's what Cypress Care and other members of CompPharma are still arguing.

In a July 8 letter to Texas Attorney General Greg Abbott, the coalition argued that provisions within the bill do not apply to pharmacy benefit managers, and noted that the state's existing labor code already allows benefit managers to contract with carriers to provide the carriers with discounts from the state's pharmacy fee schedule.

Daryl Corr, the president of Tampa-based pharmacy benefit manager Healthesystems, said his company has spent a lot of energy on this issue and still hasn't found satisfactory answers.

"Working through this issue has been extremely difficult," Corr said. "Although the language in House Bill 7 was very clear, we have had to spend a lot of time and resources developing contingency plans in order to address the conflicting language in House Bill 473 about pharmacy benefits, and yet there hasn't been much clarity provided as to what the industry is going to be required to do."

Pharmacy benefits were specifically not mentioned in House Bill 473, and the fact that pharmacy benefit managers are squirming over a Texas Department of Insurance ruling that they are included as voluntary networks is an "unintended consequence."

Regardless of how the state attorney general rules on the issue, pharmacy benefit managers doing business in Texas are preparing to shift gears.

Companies like Healthesystems are trying to maintain as close contact as possible with the legislative activity to determine what the next steps will be. In the meantime, pharmacy costs are higher in Texas than they are in most places.

According to the Cambridge, Mass.-based Workers' Compensation Research Institute, data collected in 2006 and 2007 found that the average payment per claim for workers' comp prescription drugs in Texas was $536, a 30 percent increase over the median of 16 states in the study.

Why? Because Texas doctors are prescribing expensive brand-name pain medications far more frequently then they should, said Krista Fergason, the division director of risk management services for workers' comp administration at the Texas Association of School Boards.

The powerful pain medication Actiq, for example, is being prescribed on first visits for injuries like lower back pain. Actiq was developed for terminal cancer patients, not for on-the-job injuries and is too strong for lower back pain. "Our use of narcotics in the state of Texas is very high, narcotics average 45 percent of total drug costs," Fergason said.

The association has been successful in using the combined efforts of its pharmacy benefit manager, Columbus, Ohio-based Progressive Medical Inc. and a physician peer review system to control the prescription of expensive opioids and other narcotics before they are administered, rather than wean injured workers off painkillers like Percocet and Oxycontin after months of use.

Using that strategy, along with other cost saving measures, the association has cut workers' comp pharmacy spending by 45 percent in the last 18 months. "I very strongly believe that you can control a claim if you can control the drugs at the very beginning of the claim," Fergason said.

One also has to control the relationship between patient and doctor. Injured workers who don't face out-of pocket expenses for powerful and addictive medications will have a tendency to pressure their doctors for the best they can get. Picture an injured 250-pound construction worker talking to a 170-pound physician behind closed doors.

"I think anytime you are in a situation where you can receive medical care and there is no shared cost then you are going to have overutilization," said Herman Wilks, a department director of workers' comp claims administration with the Texas Association of School Boards.

"The key is many doctors and providers fall into giving the patient exactly what they want and some of them are not trained and equipped to stand up those patients," Wilks said.

Greg Herzog, associate director of public affairs for the Texas Medical Association, said physicians in Texas are pleased so far with the progress toward creating a closed formulary for workers' comp, but fear restrictions on a doctor's freedom to treat patients as they see fit.

A closed formulary could establish an approved first line of prescriptions that are less prone to abuse and require preauthorization for addictive drugs prone to abuse.

"Having practice parameters is fine and the doctors understand the necessity to have some of that but I think the ability to go outside of that is something that is critical as well," Herzog said, arguing that no two injuries are alike.

Texas, like many states, has an opioid problem in workers' comp. Not only are injured workers receiving more powerful pain medications, they are receiving them in greater quantities, according to WCRI data.

Injured workers in Texas prescribed Vicodin received on average of 162 pills, compared to the 132-pill average usage for the 16-state median, according to institute data. Darvocet users, on average, received 90 pills per claim in Texas, compared to the median of 76 pills per claim.

This dynamic brings us to the doorstep of what is most likely the elephant in the room when it comes to gauging the unintended consequences of workers' comp reform, no matter the state.

Pharmacy benefits managers, carriers, doctors and legislators can wrangle over closed formularies, or whether as in the case of Texas, benefits managers are even legal. Still, the facts remain, opioid use for injured workers is exploding.

According to excerpts from the quarterly magazine Pain Physician News, published by the American Society of Interventional Pain Physicians, 80 percent of all opioids consumed are consumed in the United States, a nation with only 4.5 percent of the world's population, according to the Central Intelligence Agency.

Pain medication abuse is an epidemic, said CompPharma's Paduda, and Wilks, of the school board association.

Paduda points to how efforts to control workers' comp costs in California have produced yet another unintended consequence of reform. When California lowered its fee schedule a couple of years ago in an attempt to reign in pharmacy costs, the use of opioids increased because the drugs got even cheaper.

"What we saw in California was a change from a high fee schedule to one that is the lowest in the country," Paduda said. But look what happened after that 2004 reform effort known as Senate Bill 899 was signed into law. The use of Schedule II narcotics, those classified as highly subject to addiction and abuse, has exploded, according to researchers Alex Swedlow and John Ireland of the California Workers' Compensation Institute.

Schedule II narcotics as a percentage of workers' comp outpatient prescriptions grew from 0.9 percent to 5.9 percent between 2005 and 2008, the researchers found. As a percentage of overall workers' comp pharmacy spending, it grew from 2 percent to 18 percent over the same period.

Workers on opioids are expensive to medicate, and the fact that they are on opioids limits their return-to-work function, a crucial piece of workers' comp cost control, Paduda said.

The result is extended disability for workers on narcotics, yet another unintended consequence.

Whatever the attorney general decides in Texas and whether pharmacy benefit managers there live to fight another day or die, the use of powerful pain medications is exploding and, when one looks for an answer as to why, there is plenty of blame to go around and not a whole lot of trustworthy answers.

December 1, 2010

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