Payers Grapple With Steep Drug-Price Increases

Tuesday, January 12, 2016 | 1

The price of Lyrica, a commonly prescribed pain medications in workers’ compensation, shot up 9.4% on New Year’s Day, as drug-maker Pfizer increased U.S. prices for more than 100 of its drugs.

It’s a sign that workers’ compensation payers will continue to face drug price increases from two directions: branded drugs as well as generic drugs. And the price increases are creating a stronger incentive for payers to implement programs to reduce medication costs, such as using mail-order drugs as much as possible and reducing drug utilization.

While increasing drug prices aren’t a new phenomenon, what has changed for drug makers is “how brassy they are,” said Joe Paduda, president of the pharmacy benefit management consortium CompPharma.

“What it comes down to is they’ve raised prices because they can,” Paduda said.

Drug makers have more pricing power when it comes to brand drugs, which lack the competition typically seen among generics, Paduda said. And in the case of Lyrica, Paduda said, the patent hasn’t yet expired, meaning there’s not yet competition from generic versions.

Pfizer confirmed the 9.4% price increase for Lyrica, a heavily advertised pain drug, to Reuters news service. Lyrica, which generated $2.3 billion in U.S. sales in 2014, is among the top prescribed drugs in workers’ compensation, used to treat neuropathic pain that arises from damage to the nervous system.

Pfizer noted in comments to Reuters that the increase is to the list price of the drug, and doesn’t factor in discounts provided to some health plans and programs. Drug makers have said the prices help cover the cost of research and development of the drugs.

Paduda doesn’t buy that argument, saying drugs are frequently FDA-approved or near approval by the time the drug companies acquire them.

“There is very little justification that the money went to research,” he said.

Workers’ compensation payers are feeling the squeeze as the price of branded as well as generic medications continues to climb.

The average wholesale price for brand medications increased 12.5% in 2014 and 13.3% the year before, according to a 2015 drug trend report from Helios. The report analyzed 400,000 claims and 7 million prescriptions in 2013 and 2014.

While generic prices had stayed relatively flat from 2010 to 2013, with annual increases of less than 1%, generic prices suddenly shot up in 2014 by 10%. The overall price increase for generic and branded drug prices combined was 11.4% in 2014.

Lyrica ranked No. 2 as percentage of drug spend on branded medications in 2014, Helios said, ranking behind OxyContin tablet. But while OxyContin increased in price by 3.7% in 2014, the average wholesale price of Lyrica went up 20.5% that year.

In a report from the National Council on Compensation Insurance, Lyrica ranked No. 3 in terms of its spending in 2011, accounting for 4.6% of money spent on drugs, behind OxyContin at 7.4% and Lidoderm at 4.9%.

In an analysis of anti-convulsant drugs, medications that are frequently used in workers’ comp to treat neuropathic pain, Lyrica accounted for 45% of the 2014 spending, according to the Helios report.

“While (Lyrica) is not the most commonly prescribed medication in this class, its cost drives nearly half of the total anticonvulsant spend,” the Helios report said. “A generic alternative is not expected before 2018, and no other generic medications are expected to enter the market in 2015 in this therapeutic class.”

However, the Helios report noted a 4.5% increase in total days supply of a different anti-convulsant, gabapentin, and a 1.7% decrease in supply of Lyrica, “demonstrating a shift toward gabapentin as a first-line therapy for neuropathic pain.”

In a recent webinar on controlling drug costs hosted by the Pharmacy Benefit Management Institute, Helios representatives recommended using mail order, or home delivery, of drugs is another way to reduce drug costs. And generic drugs remain cost effective, despite their recent price increases, they said.

One way payers can help keep drug costs down by tightening their provider networks, according to an article from the Marsh Workers’ Compensation Center of Excellence.

“Establish a network of preferred doctors and other providers that you trust to adhere to your pharmacy guidelines, including those related to physician dispensing, and that can offer injured workers alternatives to pain medication, such as counseling and physical therapy,” the article advises.