Calif. Compound Med Bill Half a Loaf is Worse than no Loaf at All

Tuesday, August 17, 2010 | 0

By Joe Paduda
CompPharma and Health Strategy Associates

The California state Senate will be considering Assembly Bill 2779 today, a bill that would (among other things) require prior authorization of compound medications for work comp claimants. While there's no question compound meds are a big issue, the bill would do nothing to solve the Golden State's larger problem out of control drug utilization.

(Thanks to WorkCompCentral for the heads up.)

Here's the issue.

The work comp drug fee schedule in California is pegged to Medi-Cal, resulting in the lowest reimbursement for drugs in the nation (with the possible exception of Washington).

Pharmacy benefit managers (PBMs) operate on the difference between what they pay the pharmacy and what their customers pay them. In California, that delta is tiny, if not negative. If PBMs don't have any operating margin, they can't afford to allocate clinical resources to deal with prior auth requirements; they'll lose even more money in an effort to help their clients. That's neither appropriate nor good for the long term health of the comp business in California.

To those who claim the low fee schedule hasn't caused any problems, I'd suggest a thorough read of the California Workers' Compensation Institute's excellent discussion of the explosive growth of narcotic opioids among comp claimants. Here's the brief takeaway California slashed the work comp pharmacy fee schedule just about in half six years ago. Since that time, the number of scripts per claimant has increased 25% and costs per claimant are up 31% (CWCI stats). And that's not the worst of it. Schedule II narcotics have gone from less than 1% of scripts to almost 6%, a six-fold increase.

But what does that have to do with a bill designed to attack one of the emerging cost drivers compound meds? Isn't the proverbial half a loaf better than no loaf at all?

No. While the bill enables payers to deny compound meds for medical necessity (a relatively easy call, as I don't know of any evidence-based guidelines that recommend compounded medications, PBMs simply can't afford to develop the workflows, do the research, hire the clinical staff, and manage and monitor the intake/referral to the adjuster/approval-denial/appeal processes. This is a lot of work, requires careful planning and implementation, and must include clinical staffing nurses, pharmacists, and in some cases perhaps physicians.

We've seen the impact of the low fee schedule on total costs they've gone up. What we haven't seen is the impact on injured workers many more are now on narcotic opioids, with some undoubtedly suffering from all the complications linked to these potentially debilitating and addictive drugs.

AB 2779 piles more work on top of an already overburdened industry, while doing nothing to address the underlying problem.

A major step in the right direction would be for California to de-link the comp fee schedule from Medicaid. That would give PBMs the pricing stability they need to help their clients regain control over drug costs.

For a detailed discussion of Medicaid's suitability for work comp drug pricing, click here.

Joe Paduda is co-owner of CompPharma, a consortium of pharmacy benefit managers, and owner of Health Strategy Associates, a Connecticut-based employer consulting firm.