Rising drug prices continue to be an area of concern that defies easy explanation. While utilization of cost-saving generics continues to go up, so too does overall spending. According to a 2021 study, generic medications represent 84% of drugs sold in the United States by volume, but only 12% of U.S. spending.
Do increased name-brand drug prices alone account for this spending increase?
Recently, the myMatrixx clinical pharmacy team published a white paper discussing this view and identifying segments in the workers’ compensation drug market that are driving costs outside of the traditional brand-versus-generic lens. This paper — the first part of two on the state of drug pricing — analyzes three key segments that do not receive the same attention as traditional name-brand drugs.
Specifically, understanding and managing specialty drugs, compounding and physician dispensing are essential to any cost-savings strategy in today’s market. Any one of these segments can have a dramatic impact on overall spending, even as claim counts decline.
1. Specialty Drugs
Specialty medications are a growing category used to treat complex conditions such as cancer, rheumatoid arthritis, HIV, and hepatitis C. Even though less than 2% of the population uses specialty drugs, those prescriptions account for a staggering 51% of total pharmacy spending, according to data from Evernorth.
The 2020 myMatrixx Drug Trend Report shows that specialty medications were responsible for only 0.7% of all retail prescriptions for workers’ compensation but drove 9.5% of costs.
Because many specialty drugs have come to market so recently, they are still under patent protection and do not have generic equivalents available.
Taking a vigilant and proactive approach to any claims with specialty drug prescriptions is the best way to ensure both the best patient outcome and the most appropriate drug spend for the payer. A range of potential solutions including therapy compliance, biosimilars, and generics can help with managing this challenging area.
Compounding describes the combination, mixing, or altering of drug ingredients to form a new compound that is unregulated by the FDA. By definition, these compounds are neither brand nor generic drugs. Although they account for a small percentage of total prescriptions in workers’ compensation, this class has come to be a disproportionate driver of costs.
There are many perfectly valid reasons why a pharmacy would create a compound drug for a patient, including allergies to ingredients that exist in a medication. Additionally, some patients who are sick or elderly may require a liquid version of a certain drug due to an inability to swallow.
Unfortunately, compounding can also be a source of exorbitant and unnecessary costs for payers across the health care and workers’ compensation systems. In one recent high-profile fraud case, a multi-state compounding conspiracy was charged for billing insurance companies nearly $50 million in unnecessary compounds.
We can point to compounding as an area where myMatrixx has responded to and addressed this particular issue to a largely successful degree. In the 2018 myMatrixx Drug Trend Report, compounding represented only .02% of prescriptions, with a year-over-year decline in spending of 42.3%.
Prescriptions for compounds need to be carefully monitored from both a patient safety and cost standpoint to ensure the practice is clinically necessary and financially appropriate.
3. Physician Dispensing
Physician dispensing describes when doctors bypass pharmacies and dispense a drug directly to the patient. In some situations, there may be an overlap between physician dispensing and compounding if the physician’s office is creating and dispensing a compounded medication.
Once again, while there are valid reasons for prescribers to dispense medication directly at point-of-care, such as privacy or curbing unfilled prescriptions, there is also an elevated risk of unnecessary costs. One area of physician dispensing that we have identified as a major cost driver in workers’ compensation that offers little-to-no clinical benefit to injured workers is private label topicals. Often, private label topical medications dispensed at point-of-care are egregiously priced and offer little to no therapeutic advantage over traditional therapies, many of which are available over the counter.
While topicals represent only 12% of all physician-dispensed prescriptions, they made up 35.4% of total spending. A particularly egregious example is diclofenac sodium solution 1.5%. Data available to myMatrixx indicates that the cost of physician-dispensed private label products may be as much as 5 times higher than a comparable product from a retail pharmacy.
Download the Full Report to Learn More
For payers in this sector, controlling costs requires an understanding of these less traditionally understood market segments combined with careful clinical and formulary oversight. Even with high generic utilization and substitution rates, it can take only one avoidable high dollar claim to artificially inflate your portfolio.
To learn how PBMs like myMatrixx are working to understand these market forces and respond appropriately, download and read the full white paper today.
This is a sponsored post from WorkCompWire marketing partner myMatrixx.