The Role of the PBM in Workers' Comp

Friday, February 19, 2010 | 0

By Joe Paduda

Work comp drug costs account for about one-sixth of medical expenses, and are increasing at a rate appreciably higher than overall medical cost. Why?

And more importantly, how are some payers able to keep drug trend negative?

I've just come from CompPharma's annual meeting in St Pete: CompPharma is a consortium of work comp PBMs run by myself and Helen Knight. Nine of the nation's 11-largest PBMs are members and together they account for more than 75% of the work comp drug spend. From conversations with the PBMs, and from discussions with work comp payers there appears to be a couple attributes that are consistently present among those payers enjoying low drug trend.

They partner with their PBMs. The succesful payers don't tell, direct, mandate or demand, they listen, ask, analyze and collaborate. Most of all, they recognize that their PBMs know a lot about managing drug spend. This shouldn't be a surprise as that's the reason PBMs exist. Sure, many also provide ancillary services, but in most cases these are very much 'ancillary' to pharmacy. These payers take advantage of their PBM's deep experience, the knowledge gained from working with many payers for many years in many states. They understand what works and what doesn't, and why.

The other distinguishing chararcteristic has to do with size. Smaller payers are seeing better results in terms of drug cost inflation than their larger competitors. This may well be due to their slower adoption of cost controls; in the past larger payers implemented more cost controls sooner and they saw lower trend than smaller payers. So some of this may well be 'catch up'.

But catching up required smaller payers to set up, implement evaluate and fine tune multiple pretty sophisticated programs, without the staff, funds, and resources of the big boys. Instead they turned to their PBMs, a decision that has paid off handsomely.

This isn't to say all PBMs are equal performers and worthy of consideration; there are bad actors in every business.

What does this mean for you?

Maybe you should ask your PBM what they would do if they were in your shoes. And do it with a VERY open mind.

Joe Paduda is principal for Health Strategy Associates, a Connecticut-based employer consulting firm. This column was reprinted with his permission from his blog, http://www.managedcarematters.com