Managing the Challenges of Increasing Medication Costs

Managing medication costs has become a key business issue in the workers’ compensation arena. Challenges associated with managing medication costs include price inflation, paying for expensive brand medications, and dispensing inappropriate medication. In fact, price inflation for pharmacy costs is projected to increase by 148 percent over the next 11 years. If that was not enough, brand medications can cost up to three times more than their generic counterparts. If we could only contain pharmacy expenses, then we could improve our bottom line. Without proper management, these challenges can result in an overall rise in the cost of pharmacy expenses.

Companies can gain more control over medication costs by putting the proper processes into place. An effective way to do this is by working with a pharmacy benefit manager (PBM). A PBM offers programs and services that give companies more insight into their total medication costs while streamlining pharmacy benefits processes.

How does a company control medications costs?

• Make it easier for your injured parties to receive prescriptions by implementing home delivery and retail drug card options that will decrease the administrative burden on the claims professional, allowing you to realize significant cost savings.
• Maximize drug utilization review programs by using an online, concurrent review process to guard against inappropriate utilization of drugs and duplication of therapy.
• Suggest generic drug options, when available.
• Use a technology platform to streamline and organize all claim related information, reduce paperwork and errors, and provide a single source of prescription history data.
• Track your progress and illustrate results using reporting tools such as customized reports, cost containment reports, cost projection reports and many more.

Defining the Services of a PBM
A PBM provides a variety of programs and services that assist companies in controlling medication costs while providing excellent service to the injured party. Programs include offering network discounts, a national network of pharmacies, and other comprehensive programs such as mail order and drug utilization review to assist in the overall goal of cost containment.

Network Participation and Discounts
For an injured party to receive a discount on prescription medication, a PBM partner must have a vast national network of retail pharmacies that accepts the discount. The network must include all major chains and be easily accessible to the injured party. A PBM also contracts and negotiates volume discounts with national retail pharmacies and passes the discounts on to clients. PBM partners vary in their offerings since discounts are based on volume, program use and regulations set forth by the state.

Program Penetration
A PBM must have a program that encompasses each phase of prescription fulfillment. Each phase of prescription fulfillment includes programs that capture first prescriptions, ongoing prescription needs and long term or catastrophic prescription requirements. In addition to these programs, a well-managed PBM program offers training at both the claims professional level and the injured party level to ensure that the program is used effectively. A PBM program that does not have each of these phases of program management will lead to poor program penetration or usage, which will decrease a company’s savings and result in an injured party paying out of pocket for prescription medications.

Mail Order Programs
A PBM’s mail order program is extremely effective at providing extended care to injured parties that require ongoing prescription medications. A PBM program defines criteria and processes to identify good candidates for conversion to mail order. Mail order programs work especially well for an injured party that cannot leave the home or for those who will be taking multiple long-term medications. In addition, while the program not only offers convenience to the injured party, it decreases the administrative burden carried by the claims professional, particularly since it is typical for an injured party to receive a 90-day supply of medication.

Mail order programs represent a cost savings for the injured party because mail order programs are typically lower in price than a retail pharmacy for brand and generic medications.

Drug Utilization Review
Drug utilization review (DUR) conducts prospective planning that includes formulary management, historical medication usage, physician intervention and a variety of other clinical factors to eliminate fulfillment of medications that are inappropriate.

A well-managed DUR program, coordinated by licensed pharmacists, is the most valuable benefit of a PBM. Despite the network discount on a prescription, savings are irrelevant if the medication should not have been dispensed in the first place. A quality DUR program can result in significant incremental savings – usually between 10-13 percent above the prescription cost savings.

A PBM typically offers various levels of drug utilization review.

Prospective DUR: A prospective program allows all involved parties to plan for future outcomes with up-front information. If potential problems are found, the claims professional may withhold the approval of the claim. At this point, a formulary is established based on the injury date and type (see formulary management).

Concurrent DUR: Typically a PBM offers a concurrent DUR program that occurs in real-time at the pharmacy. When an injured party fills a prescription, the prescription is audited for inappropriate use against a formulary, duplication, multiple physicians, excessive dosage, drug-to-drug interactions, and other items of this nature. Depending on the medication formulary, the pharmacist may also be required to seek authorization from the PBM or the claims professional.

Retrospective DUR: A retrospective program occurs after medications are filled using historical data. A PBM will work with the injured party and determine which key areas the injured party would like to review on a retrospective basis. Key areas often include setting thresholds for excessive quantity, early refill, high dollar amounts and certain classes of medications.

Formulary Management
Working with a PBM to set up the appropriate formulary is a key part of a successful DUR program. A PBM should ensure that the formulary is specific to the injury. It is important to address the nature of the injury when determining the classification of medication that is appropriate for treatment. Formularies should be based on three primary factors: body part, date of injury, and injury type. Using an injury-based format allows the PBM to use published clinical guidelines to establish and assess what is appropriate and within the scope of treatment for the injury. This is vital in preventing fraud, abuse and misuse.

Here is an example of how to use an injury-based formulary to prevent inappropriate medication fulfillment:
An injured party with an acute head injury is allowed to fill a prescription medication typically prescribed for headache, seizures or pain. If the injured party tried to fill a prescription for antidepressants or muscle relaxants, the medications would not be dispensed because it is outside the formulary. However, if the injured party’s injury progressed into a chronic head injury, then antidepressants or muscle relaxants may eventually be covered because the injury-based formulary would change.

Generic Substitution
A PBM should have a program in place that automatically converts medications from brand to generic (if a generic substitution is available). The program should occur concurrently, or at the point of fulfillment at the pharmacy and should also occur retrospectively or historically as part of the Drug Utilization Review (DUR) process.

Technology and Reporting
While a PBM program is not effortless on the part of the injured party and claims professional, it should be easy to use. An effective PBM program should not only reduce overall medication costs, but reduce the claims professional’s administrative time. In addition, a wide range of reports and reporting options should be available to continually assess the value of the program.

Summary
A PBM has various programs that work together to reduce medication costs for the injured party. These programs include offering a vast national network that offers volume discounts on medications. They also should encompass various processes to ensure that injured parties are using the program and accessing available discounts, leading to good penetration. PBM programs should offer additional savings through mail order and by enforcing the use of generic medications when they are available.

An injury-based formulary management program is key to the success of a DUR program. A well-managed DUR program will contain prospective, concurrent and retrospective programs and should be run by a licensed pharmacist. The program should be easy to use and show its value through detailed reports.

The PBM Solution
By using a PBM, companies can receive an average savings of up to 25 percent on their workers’ compensation pharmacy spending. While many companies partner with a PBM to minimize the impact of rising drug costs, they also realize administrative and injured parties’ satisfaction benefits.

Injured Party Satisfaction
Satisfying injured parties is the highest priority for workers’ compensations insurers. A PBM can help assist with this goal by:

• Reducing out-of-pocket expenses for the injured party
• Making it easier for the injured party to get the medications they need through a vast national network
• Offering a mail order program

Some examples of the administrative benefits a PBM provides to the claims professional include:

• Less paperwork for medication invoices and reimbursement issues
• Easily accessible prescription history for the injured party
• Reduction in the amount of inbound and outbound phone calls
• Increased ability to detect utilization issues and potential problems

Summary
As medication costs continue to rise at a rapid rate, workers’ compensation insurers are facing increasing challenges in containing medication expenses. By using an experienced PBM that offers a comprehensive range of programs, workers’ compensation insurers can get control of medication costs while maintaining, or even increasing, injured party satisfaction.

Ultimately, it is important for a PBM to have experience in the workers’ compensation industry, offer a vast national network, extensive clinical pharmaceutical experience in the DUR program, flexible and user-friendly technology and maintain strong reporting features. A PBM should be easy to work with, offer customized solutions and demonstrate its value to your organization through day-to-day activities and reporting.