The utilization side of the story: utilization management is an increasingly important component of controlling pharmaceutical costs. No wonder workers' compensation PBMs are multiplying like rabbits

Risk & Insurance, Nov, 2007 by Maddy Bowling, David Huth

[ILLUSTRATION OMITTED]

Let's say you and your pharmacy benefit manager are sophisticated and vigilant in your efforts to control spending on pharmaceuticals. Despite the wholesale pricing complications, you feel confident that your injured employees are getting what they need to heal the injury and return to work quickly at the lowest possible price.

Despite vigilance on pricing, your efforts could be almost entirely wasted if the treating doctor is prescribing the wrong medicine, for too long a time and without monitoring the effectiveness of the treatment. Utilization--how often and how much of a drug is used--can offset any savings.

And it isn't whether the injured worker is taking too many drugs or too much of a single drug. With some therapies an insufficient amount of treatment with a pharmaceutical can delay recovery and keep the worker off the job longer. But, by combining ongoing analysis of claims data, benchmarking with existing data and following the most recent treatment protocols for return to work, employers probably have a better chance of keeping utilization costs where they should be.

Much worse, however, is that insufficient monitoring of drug treatment therapies can result in further complications to the original injury and possibly additional disabling issues. Our confusion about the cost of prescription drugs is only compounded by an industry-wide lack of information about what represents appropriate utilization of pharmaceuticals in workers' comp claims.

Many readers should be familiar with the "traditional managed care" formula: unit cost management plus utilization management plus disability management equals workers' comp managed care.

Unit cost management is managing the price of each component of the care. Utilization management is managing the necessity, appropriateness, setting, intensity and duration of each component of the care. Disability management boils down to managing the quickest sustainable return-to-work program.

The same basic formula applies to managing the pharmaceutical aspect of care. For different claims, different jurisdictions, different employers, one component may carry more weight than others, but the best overall outcome results from managing all three elements simultaneously.

Unfortunately, managing pharmaceutical unit pricing in the current workers' comp environment can quickly become an exercise in futility given all the different drug pricing mechanisms, conflicting sources of price data and potentially contradictory state fee schedules. (See Part I, now available at www.riskandinsurance.com.)

Managing the utilization aspect of pharmaceutical costs can be almost as challenging given the lack of standards of care and the paucity of timely industry-wide data for comparison and benchmarking. Here we're talking about, from a medical point of view, how long the patient should be on a particular drug regimen, what are the criteria for ending that treatment and where does a return-to-work program fit into that mix.

Most of the available workers' comp-specific data on pharmacy unit cost and utilization rates comes to us from organizations such as the National Council on Compensation Insurance and the Workers Compensation Research Institute. They focus on reporting developed claim data that is typically at least three to four years old. The age of the available industry data makes it especially difficult for companies to control the utilization component of their pharmaceutical costs and to know whether their efforts are successful.

For example, an excellent study of workers' comp prescription drug costs and utilization was published by NCCI in July 2006. Unfortunately, that study only included data on claims through 2003. In fact, two of the top 10 prescribed drugs presented in the NCCI study--Vioxx and Bextra--have already been withdrawn from the U.S. market. The FDA has also recommended "black box warning" labels for another top 10 drug--Celebrex.

According to the NCCI study, these three drugs represented nearly 15 percent of the total prescription drug payments in workers' comp in 2003. But they were restricted or removed from the market nearly four years ago. Payers and employers are now in the dark on what drugs have emerged as the industry's leaders in terms of utilization or cost and how overall prescription drug costs are trending since 2003.

This is where payers and employers can benefit tremendously from the assistance of a workers' comp pharmacy benefit manager, or PBM. Historically, PBMs have offered their clients access to discounted pricing arrangements with a network of pharmacies, akin to the PPO arrangements used for traditional medical care. As anyone who has attended an industry conference in the last five years knows, workers' comp PBMs have been multiplying like rabbits.

Partnering with a PBM that truly has workers' comp expertise is becoming increasingly important as the utilization management component of managing pharmaceutical costs catches up to, or in many eases even surpasses, the unit price component.