By: Dennis M. Sponer, CEO, ScripNet, Inc.
For Workers’ Compensation (WC) payers, whether private or public, carrier or self insured, make-buy decisions about Managed Care Organizations (MCOs), Third Party Administrators (TPAs) and Pharmacy Benefit Managers (PBMs) are based on many factors. Professional reputation, timely and responsive customer service, and ultimately – how it improves patient outcomes, are all very important. But with costs on the rise and organizations wanting to focus on their core competence, outsourcing has become a common industry practice for many WC payers. Outsourcing is based on the premise that an outside firm can perform these activities at a lower cost than staffing the function internally. But to select and cost-effectively manage a PBM, TPA or MCO, it is best to understand specifically what they do to contain costs (drug prices and utilization in the case of a PBM) and what pricing options the PBM offers for its services. This article, Part 1 of this series, deals with PBM Cost Containment Activities. Part 2 will deal with PBM Pricing.
Reports from WCRI, NCCI and others show that medical severity is on the rise, primarily driven by increased utilization, as well as the price of drugs that are particular to workers’ compensation (i.e. pain medication, especially narcotics, muscle relaxants and antidepressants). Although the number of accidents is down, resulting from higher unemployment and more effective loss prevention/safety programs, the age or longevity of claims, the number of treatments per claim and the price of drugs has more than made up for it. The workforce is also getting older, with more people not able to afford retirement, and is getting more obese, both of which add to medical severity, longer recovery times and extended benefits. And as the economy recovers, organizations will be hiring new employees, possibly younger and less experienced, skilled and trained workers, which will lead to more injuries.
WC payers protect themselves from runaway costs by contracting with TPAs, MCOs and PBMs who more effectively manage the medical spend. PBMs, for instance, contain costs by establishing pharmacy networks and negotiating discounted prices with pharmacies, which they can discount or mark up in their service offerings to customers. Yet the unit cost of drugs doesn’t have as great an impact on cost containment as efficiencies gained from PBM point-of-sale networks that require pharmacists to: adhere to injury-specific formularies, substitute generics, and obtain real time approvals for drugs that are outside of the formulary.
WC payers can save up to 30 percent on “hard” drug costs through a PBM’s network discounts (14% on brand medications and 38% on generics), which are below state-mandated fee schedules. An additional 20% to 30% can be achieved on top of those discounts, by getting injured workers to shop in-network, accept generics when available, minimize misuse and fraud, and by streamlining the communication and claims administration processes.
The larger PBMs have established retail pharmacy electronic data interchange networks with online decision support tools that provide critical information to the pharmacist and enable real-time communication between pharmacies, the PBM and WC payers to authorize, adjudicate and process claims. At the point-of-sale, the pharmacist has access to injury-specific formularies, allowing them to determine if a particular drug has been pre-approved for that injury, and to look up the injured worker to see their prescription history and employment/claimant status.
PBMs also offer Prospective, Concurrent and Retrospective Drug Utilization Reviews to contain costs and improve health outcomes, before, during and after pharmaceuticals are dispensed. Drug Utilization Reviews are a complement to the Work Loss Data Institute’s Official Disability Guidelines (ODG), which many states have adopted. ODG is used as a standard of reference for evidence-based medicine that is used in caring for injured workers. If treatment protocols fall outside ODG, preauthorization is typically required before dispensing drugs, although the WC Carrier and PBM will typically work together to agree on a specific formulary with adjudication policies for specific injuries and/or customers. Drug Utilization Reviews, combined with ODG compliance, have increased business process efficiencies and lowered costs for the insured and insurance carriers, while improving safety and service for the injured worker.
There are three types of drug utilization review:
Prospective Reviews are done before a medication is dispensed using point-of-sale information and reviewed when the pharmacist is about to dispense a medication. It ensures that the injured worker is eligible for services and that the medication being prescribed is appropriate for the injured worker’s condition. If outliers are identified, an electronic message is sent back to the pharmacist in real-time over the point-of-sale network to ensure that the pharmacist is aware of possible problems prior to dispensing the medication. The pharmacist may be required to call an adjuster or case manager for adjudication and approval. Prospective Reviews can be based on any number of clinical and/or financial criteria to determine whether a prescription can be filled or denied, including:
- Greater than 6 medications per single injury
- Greater than 2 narcotic analgesics prescribed concomitantly
- Greater than a 60 count of long-acting narcotic analgesic for a 30 day supply.
- Greater than a 150 count of short-acting narcotic analgesic for a 30 day supply.
- Greater than a 60 count of short-acting and 60 long-acting narcotic analgesics for a 30 day supply.
- Number of Skeletal Muscle Relaxants
- Number of Anti-Depressants
Concurrent Reviews are an ongoing monitoring of drug therapy during the course of treatment. A Concurrent DUR evaluates the injured worker’s entire drug profile to ensure that the product being used is a formulary item, that there is no duplication of therapy, that refills are at the appropriate intervals, and that there are no drug interactions with other medications that the injured worker is taking.
Retrospective Review occurs after the pharmacy dispenses the medication and possibly after the injured worker’s usage. This type of DUR involves a review of physician prescribing habits and the injured worker’s medication usage patterns to evaluate proper dosing, frequency, drug interactions and medication use related to the identified injury, and if changes should be suggested to the prescribing physician.
Drug utilization review programs play a key role in helping to understand, interpret and improve medication prescribing, administration and use. Employers, physicians, claims adjusters and case managers find DUR programs to be valuable because the results are used to allocate resources more efficiently and to reduce or prevent inappropriate use of pharmaceuticals.
As part of its cost containment efforts, PBMs should regularly report on key business operations and statistics and engage in an open dialog with claims adjusters to identify ways that both can be more efficient and effective. Key business metrics that should be monitored and reported back to WC payers include:
- Network penetration (the percentage of client’s prescriptions that are discounted: i.e., in-network);
- Percentage of prescription filled that were generic versus brand;
- Percentage of first fills captured, and;
- Percentage of second fills captured.
PBMs will typically make this information, as well as historical and real-time claims data, available to clients through a web portal, so that clients can more easily understand and can more cost effectively manage the business.
About Dennis Sponer
Dennis Sponer founded ScripNet in 1997. Dennis obtained a Juris Doctorate from Brigham Young University and a Master of Laws in Taxation (L.L.M.) from the University of San Diego School Of Law. Dennis is a 1999 graduate of Leadership Las Vegas, was named to InBusiness Las Vegas’ Top 40 Under 40, and in 2009 he was named Entrepreneur of the Year by In Business Magazine. Dennis is a licensed attorney in California and Nevada, a past President of the Entrepreneurs’ Organization, Las Vegas Chapter, and is on the Southern Utah University School of Business National Advisory Board. Dennis is a frequent speaker at Workers’ Compensation and Pharmacy Conferences, including STRIMA, PRIMA, IRSG, RIMS and NCSI.
ScripNet is one of the fastest growing pharmacy benefit management (PBM) companies in North America, providing PBM services to over three million employees through pharmacies in all 50 states. ScripNet electronically processes prescription drug claims for workers’ compensation, which allows insurance carriers, large self-insured companies, municipalities, managed-care organizations, and third-party administrators to participate in better cost control and increased efficiency for pharmacists, and offers more convenience for injured workers. ScripNet offers a drug utilization review program that improves patient care, reduces fraud and abuse, and cuts administrative expense. ScripNet is a three time winner of Inc. Magazine’s annual listing of the 500 fastest growing privately held companies in the nation and was named one of the nation’s Best Places to Work in Insurance by Business Insurance Magazine.
To learn more, visit www.scripnet.com.