By Brian Allen, Vice President of Government Affairs, Progressive Medical/PMSI
Throughout the country, there are hundreds of historical depictions of villages, towns, and Main Streets representing pre-colonial times to the early 1900’s. In many of these replica towns, there is a local apothecary complete with jars of various powders, weights, scales and a vintage mortar and pestle. It is not difficult to imagine a wizened scientist with a furrowed brow hunched over the counter crushing and mixing various powders to craft medicines to treat the ailments of the local townsfolk. Modern day pharmacy care evolved from these shops where various ingredients were compounded to make a medicine that was just right for what ailed you. In the workers’ compensation system today, we are seeing an accelerating resurgence of compounded medications. But, are they really just right for what ails the injured worker?
In the modern era of pharmacy care, the use of compounded medications began in response to situations in which a patient was allergic to a medication or had a physical issue that prevented the use of non-compounded medications. In this sense, compound medications were something of a last resort, relied upon when traditional methods of delivering medication failed or were not practical. Over the last few years however, the use of compounded medications as first line therapy to treat injured workers is a growing concern.
Therapeutic Value vs. Financial Gain
In 2011, the RAND Institute prepared a paper1 for the California Commission on Health, Safety and Workers’ Compensation (CHSWC) that examined the use of compounded medications, medical foods, and co-packs in the California workers’ compensation system. The RAND paper noted that “some parties face significant financial incentives to promote the use of these products in questionable situations.” The result of these findings in California led to legislative changes that capped reimbursement for compound medications and instituted a process to verify medical necessity prior to prescribing a compound. The raised awareness in California led other states and payers to begin examining what was happening in their injured worker population.
What they found was that a number of compounding pharmacies were using repackaged medications in their compounded medications and the reimbursement rate for those repackaged medications was often 300% or higher than a similar non-repackaged ingredient. In response, a handful of states adopted rules that required the National Drug Code (NDC) of each ingredient in a compounded medication to be listed separately with reimbursement for repackaged ingredients calculated on the average wholesale price of the NDC of the original product. Most states, however, were not experiencing significant problems with compounded medications.
Then, in October of 2012, an outbreak of deaths from fungal meningitis linked to contaminated compounded medications brought national attention and scrutiny to the practice. Congress acted quickly, directing the Food and Drug Administration (FDA) to research the practice of compounding in the country and to provide recommendations for controls to prevent a future outbreak from contaminated medications. The FDA recommendations were the genesis for the provision contained in the Compounding Quality Act passed by Congress in late 2013. The Act gave much greater authority to the FDA to regulate compounding pharmacies. Since that time, recalls due to unknown particles or other sterility issues have continued. And while most have not impacted the workers’ compensation community, it is not to say the injured worker community is without impact.
The 2014 Drug Trend Report released by Progressive Medical and PMSI notes the use of compound medications is up slightly. Other workers’ compensation pharmacy benefit managers (PBMs) have reported more significant increases. Chief Clinical Officer for Progressive Medical/PMSI, Tron Emptage, notes, “As we watch the increased use of compounded medications as a part of the medication therapy for injured workers there are several concerns that should be examined. Does the medical literature and medical evidence support the use of multi-ingredient topical treatments? Is this evidence from peer reviewed and clinically significant studies? Are the ingredients commonly found in topical compounds effective? Not to mention, what is driving the significant cost of compounded medications? These are just a few of the questions to consider.”
The high cost of some compounded medications and their questionable therapeutic value raised by Emptage echoes the concern voiced by the RAND Institute – are the financial incentives becoming more important than the quality of care? There is no question that there are cases where a compounded medication is the only effective pharmacologic option. Yet now, all too frequently, the compounded medication is becoming the rule rather than the exception. And industry stakeholders throughout the system are taking notice. CompPharma, a consortium of workers’ compensation PBMs, recently released a research paper2 on the impact of compound medications and calling for tighter controls on the use of compounds, including limiting their use to situations where traditional delivery methods are not viable for an individual, obtaining documentation of medical necessity and requiring documentation on the efficacy of the proposed compounded medication.
When Texas adopted their closed formulary requiring prior authorization for drugs with an “N” status in the Official Disability Guidelines (ODG) drug list, the use of compounded medications fell off dramatically since many contained an “N” drug. The reduction, however, was short-lived as “Y” status ingredients were used instead, conceivably so the compounded medications wouldn’t trigger the prior authorization requirement. As part of its new closed formulary, Oklahoma instituted a rule that requires prior authorization for all compounded medications, allowing prescribing physicians and payer medical directors to talk about medical necessity and efficacy prior to approving the use of a compounded medication. Mississippi adopted a rule that requires pre-authorization for compounded creams, imposed a $300 per month price cap and a 120 gram quantity cap per authorization. Hawaii and other states have limited reimbursement for ingredients based on the average wholesale price, using the NDC from the original manufacturer of the ingredient; and Georgia recently adopted changes to their fee schedule that limit reimbursement for compounds for no more than three FDA-approved active pharmaceutical ingredients.
Facing a need to be “knowledgeable of all, but a master of none”, staying one step ahead can be challenging for even the most adept policy makers. And if the quickly changing landscape were not enough, let us also consider that legislators and regulators can face some reluctance to delve into the practice of medicine. This is because many legislators and regulators have a very limited knowledge of pharmaceuticals in general and compounded medications are a complex subject. Policy debates involve a lot of conflicting opinions and legislators and regulators will often defer to practitioners and their opinions over those of insurance companies and employers.
The dearth of clinical information regarding compounded medications creates additional reticence to make any substantive changes. Not to mention that there is also some confusion in state houses regarding the role the state can play in regulating compounding pharmacies since the passage of the Compounding Quality Act (CQA) by Congress. The CQA allows the FDA to retain jurisdiction for outsourcing facilities – entities that compound sterile medications – while leaving regulation of other compounding pharmacies as a responsibility of the state. Precisely where the lines cross and stop can be a gray area.
The aforementioned acknowledged, state legislators and regulators can play a vital role in switching the discussion to one of medical necessity rather than inappropriate financial gain. States should consider a pre-authorization requirement for compound medications and should also look at appropriate and fair reimbursement strategies that remove undue and excessive financial incentives from the delivery of compounds to injured workers.
Better Outcomes Are Possible
Pharmacy benefit managers can be a critical member of the team by helping insurance carriers and self-insured employers establish protocols to identify compounded medications and to initiate processes that invite and encourage discussions with prescribers to verify the medical necessity and efficacy of the proposed compounded medication. The clinical teams at the PBMs can also help evaluate the therapeutic value of the compounded medication and provide insight and support during the prior authorization or retrospective review processes. The government affairs arm of the PBM can also be of benefit as they engage policy makers in discussions about what is happening with compounded medications in their state and make recommendations on changes, both statutory and regulatory, that can help ensure the appropriate use of compound medications in their workers’ compensation systems.
Compounded medications have a place in workers’ compensation. For the benefit of all stakeholders in the system, ongoing collaboration in conjunction with the development of legislative policy that emphasizes efficacy, medical necessity, and reasonable reimbursement can be a driving force towards achieving better outcomes.
About Brian Allen
As vice president of government affairs at Progressive Medical/PMSI, Brian Allen serves as an advocate for both payors and injured parties alike. He helps clients build effective strategies to navigate or otherwise comply with legislative and regulatory issues that impact workers’ compensation and auto no-fault payors.
A former Utah legislator and lobbyist, Brian is highly regarded by policymakers nationwide for his extensive governmental knowledge and ability to drive collaboration. He has an extensive history in a wide spectrum of legislative and executive branch assignments, including insurance, workers’ compensation, technology, and municipal and local government. Throughout his career, Brian has provided strategic advice, educated policymakers, authored rules and legislation, and given expert testimony.
A certified insurance counselor, Brian has a bachelor of science in business management from Western Governors University, an online educational institution for working adults that he helped to found. He also represents the company on CompPharma, a consortium of PBMs that develops solutions to some of the industry’s most pressing pharmacy issues, and is active on a number of boards for causes spanning the community, the arts and education.
About Progressive Medical and PMSI
Progressive Medical and PMSI, both leaders in developing solutions to control the growth of medical costs in workers’ compensation, liability, and no fault insurance, have merged to create one of the most dynamic workers’ compensation specialty services companies in the industry. The combined company, which will emerge as one brand in 2014, delivers proven solutions across the claims lifecycle, from first fill to settlement and is accelerating change in the industry by delivering solutions that provide more control to achieve better outcomes – both clinically and financially. Learn more at www.FirstFilltoSettlement.com
1Barbara O. Wynn, Rand Institute Working Paper – Use of Compound Drugs, Medical Foods, and Co-Packs in the California Workers’ Compensation Program, January 2011
2CompPharma – “Compounding is Confounding Workers’ Compensation”, April 2014