Articles on Pharmacy Benefit Management

Workers' Comp PBMs Manage Niche Cost-Containment Area

Reprinted from the issue of May 27, 2005, DRUG BENEFIT NEWS, biweekly news, data and business strategies for health plans, PBMs and pharmaceutical companies.

Prescription drugs for injured workers can make up anywhere from 10% to 20% of total workers' compensation medical costs, and payers can save a significant amount of money in this area, advises ScripNet President and CEO Dennis Sponer. With state workers' comp laws becoming a little more flexible in recent years, Las Vegas-based ScripNet and a handful of other PBMs have designed specialized programs to help insurers and self-funded employers manage their workers' comp claims.

Total workers' comp prescription drug costs in 2004 were approximately $3.5 billion, up 12% from the 2003 level, according to a recent survey of payers conducted by Health Strategy Associates of Madison, CT.

While companies like ScripNet and Fort Worth, TX-based WorkScripts specialize in pharmacy benefit programs for workers' comp, Rockville, MD-based HealthExtras, Inc., which primarily manages group health pharmacy claims, enhanced its workers' comp offering last year with the acquisition of Managed Healthcare Systems, Inc. The bulk of savings these companies achieve for payers comes from contracting with pharmacies to pay them fees below the state-mandated schedule for workers' comp prescription drugs, as well as added services such as drug utilization review (DUR) and electronic claims processing, suggests Sponer.

Several years into its contract with ScripNet, the Texas Association of Counties has seen savings reach more than $250,000 in one year, mainly from the utilization of network pharmacies and the paperless, hassle-free environment, says TAC's claims department manager, Larry Cowles. TAC, a statewide, nonprofit trade association, purchases health care for more than 45,000 county employees.

HealthExtras CEO David Blair tells DBN his firm started offering workers' comp services about six or seven years ago in response to requests from its self-funded employer groups. All kinds of employers offer workers' comp pharmacy programs, but the incidence of work-related injuries tends to be much higher in manufacturing jobs, he says. HealthExtras manages the workers' comp pharmacy claims for Home Depot, Tysons Food, and Food Lion, among other large employers.

When the company began managing clients' workers' comp prescriptions, HealthExtras found that many payers had done very little to manage their workers' comp pharmacy costs. "You'd be surprised that there are all kinds of drugs getting processed for workers' comp," says Blair.

Management Services Produce 'Soft' Savings

Payers can save at least 10% to 30% on "hard" drug costs through network discounts offered by workers' comp PBMs that are below state-mandated fee schedules, claims Sponer, but can achieve up to an additional 30% in "soft" savings through the management services offered on top of those discounts. Here's a look at some of the services commonly offered by workers' comp PBMs to manage pharmacy costs:

• Eligibility verification. Because injured workers are not automatically in the PBM's system when they are injured, the first thing companies must do is try to get all available information from their clients on the new covered worker and his or her injury. Then the PBM sends out a pharmacy card to the injured member so that the claim is not submitted to the member's regular group health insurer. Using its electronic point-of-sale system, ScripNet also verifies that the submitted prescription relates to a member who is eligible to receive benefits under the retail drug card program.
• Electronic adjudication. The paper-based system originally being used by many of ScripNet's clients was inefficient and expensive, says Sponer. Swift electronic reporting and adjudication eliminates many of the payment hassles faced by pharmacies, insurance companies and patients, he says.
• First-fill programs. These programs ensure that workers never go without their first fill of a medication when they are injured, even if their employer has not yet registered their injury with the workers' comp PBM. ScripNet, for example, would go at risk for first prescriptions for a period of seven days or for $50 worth of medication. First-fill programs are especially important if a worker is hurt during non-traditional business hours, adds WorkScripts Vice President and Chief Marketing Officer John Bramblett. WorkScripts serves mostly self-insured Texas employers that don't opt for the state-funded workers' comp program.
• Network contracting. Firms also must have workers' comp-specific contracts with network pharmacies, says Sponer. "We have seen many PBMs get in serious trouble with the chain drug stores (and with their own clients) for attempting to 'slide' workers' compensation-covered prescription medications under a group health or managed care pharmacy contract," he tells DBN. Workers are also encouraged to use the network pharmacy so that payers benefit from the negotiated discounts.
• Formulary management. Rather than steer members toward lower-cost drugs or drugs that are tied to manufacturer rebates, workers' comp formularies ensure that the patient fills a prescription for a work-related injury and not for something that qualifies for payment by the primary health insurer. "There are obviously a concentrated few drugs that are appropriate" for workers' comp, says Blair.

Meds Scrutinized for Appropriate Usage

WorkScripts' formulary, for example, excludes classes for "diseases of life" (e.g., diabetes, cardiovascular conditions), and instead will pay for pain medications, muscle relaxants and pain adjuvants (to enhance how well a pain medication works). In addition, WorkScripts puts certain high-cost drugs on a prior-authorization list. That doesn't mean that WorkScripts would never pay for a diabetes or cardiovascular medication — the company would review those requests on a case-by-base basis to make sure the drug is necessary in relation to the injury, says Bramblett. "Some meds are very expensive, and.we just want to make sure they are being used in the appropriate circumstance," adds Vice President of Operations Mark Bradford.

OxyContin, for instance, is so frequently misused in workers' comp that ScripNet nicknamed one of its client reports on drug usage the "OxyContin Report."

• DUR. PBMs also offer DUR programs to manage cost containment and prevent medication errors. Workers' comp DUR programs typically check for overuse, multiple drugs in the same therapeutic class, duplicate prescriptions, early refills, and "doctor jumpers" (patients who see several doctors to get more prescriptions than they really need).

For HealthExtras, managing pharmacy benefits on both the workers' comp and group sides allows the company to integrate pharmacy data and historically look at drug-to-drug interactions or fraud and abuse, explains Blair. "It's a really unique opportunity for us to not only save our clients money but start increasing compliance." Blair estimates that 10% to 15% of HealthExtras' traditional PBM clients are also using the company for workers' comp.

• Generic substitution. Included in some of the varying and "tricky" state workers' comp rules is mandatory generic substitution, notes Sponer. Since many of the drugs prescribed for injured workers have generic equivalents, generic utilization is typically at a higher rate than it is with traditional members. ScripNet, for example, has about 65% to 70% generic use across its client base, estimates Sponer. There are also few brand-name drugs used for workers' comp that yield a high rebate return, so generic usage is also high for that reason, explains Bramblett. "On the brand side, the typical things that are used in a work-related injury are not the drugs that the drug companies are trying to push," he asserts.
  

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