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Prescription drug management - the worst is yet to come.
Up until April of 2003, one major pharmaceutical manufacturer (Schering-Plough) routinely paid individual physicians upwards of $10,000 for prescribing their drugs. The fees, which ostensibly were for "consulting services" that amounted to no work at all, were immediately cut off if a physician prescribed a competing drug, or even spoke favorably about an alternative pharmaceutical. These practices were documented in a recent New York Times front page article, which went on to discuss illegal marketing practices of other pharma giants including Pfizer, AstraZeneca, and TAP Pharmaceuticals. These "marketing activities" included paying physicians to participate in sham clinical trials and overcharging customers for drugs.
These practices, and the sheer volume of dollars they reflect, clearly demonstrate the severity of the drug trend problem facing the property-casualty industry. Simply put, the $400 billion pharmaceutical industry makes their money by getting more doctors to prescribe more expensive drugs to more patients. Certainly they also make money by creating new drugs, but with marketing dollars exceeding research dollars at most pharmaceutical companies by a factor of 2 to 1, the industry's priorities are clear.
The industry increases demand by spending on marketing "direct to consumers" (DTC) and to physicians, finding new uses for previously-approved drugs (the practice of "off-label" prescribing that leads to Workers' Comp patients with back injuries receiving drugs only approved for treating cancer pain), carefully tracking and monitoring physician prescribing behavior, and negotiating volume-based incentives, or "rebates" paid to insurers and pharmacy benefit managers that include certain drugs in their list of approved drugs (the "formulary").
With all this marketing muscle, it is no wonder prescription drugs is the fastest growing component of WC medical expense. And, with trend rates averaging above 17%, drugs will likely exceed 10% of the medical dollar this year.
There has been some good news. In the group health industry, prescription drug trend rates have been moderating somewhat. Recent legal activity may well put a damper on some of the more egregious marketing approaches, and many doctors refuse to be swayed by these "fees" that amount to little more than bribes.
Before we breathe a sigh of relief, recognize that the cost control measures that have moderated group health costs are not available to the property casualty payer. As a "first dollar, every dollar" payer, the P&C payer cannot use measures such as higher deductibles, four-tier copays, restrictive formularies, and mandatory mail order programs that have blunted group health trend rates. Perhaps even more troubling, due to the changes in Medicare drug laws, within two years almost half of all scripts will be paid for by the government. Never known as a great payer, budgetary problems are almost certain to lead the government to drastically cut reimbursement levels. As for-profit entities, the pharmaceutical manufacturers will seek to make up for their decreased margins on governmental scripts by increasing the price, and volume, of drugs reimbursed by payers with less power - ergo, prescription drug costs for the P&C industry will continue to accelerate.
If the industry is to gain some measure of control, it must do a much better job of incorporating prescription drug management into claims, managed care, and underwriting. Any program must begin with the one that writes the script - the treating physician. Payers and/or their network vendors must identify the physicians that prescribe appropriately and their alter egos, and, where possible, direct injured workers to the "right" providers. If, and when, the "wrong" providers are in charge of a patient, flag the claim, and alert a clinical professional of the potential issue. Incorporate drug management into telephonic and field case management, either by educating present staff, or, more likely, by making pharmacists available as part of the case management service. Where legal, tightly enforce formularies and generic-substitution requirements. Require claims and managed care staff to come up with a plan, and enforce it company wide. Once a physician realizes that they do not have carte blanche, their prescribing habits will likely moderate. Conversely, once a comp adjuster pays for a Lipitor script "to keep the claimant quiet", you have lost much more than the cost of that script - you have demonstrated that you are not serious about controlling drug costs.
Any program must start with the realization that the physician is inundated every day with scientific journals and clinical literature discussing the merits of this or that drug; and besieged by very-well paid, well-trained and well-dressed, attractive, articulate professional drug company reps bearing gifts for them and their staffs, all in an effort to get two to three minutes of the doctor's time. Anything less than a coordinated, well-planned and well-executed drug cost management plan will fail miserably.
Joseph Paduda, Principal of Health Strategy Associates, is an independent consultant focused in the Workers' Compensation and managed care markets. His clients include large Workers' Compensation insurers, managed care organizations, self-insured employers, and software and systems companies. Prior to his present position, Mr. Paduda was vice president of MetraComp, a United HealthCare Company specializing in the application of managed care techniques to the Group Disability and Workers' Compensation industry. Paduda was responsible for marketing, sales, and account management. Paduda holds a Master's of Science Degree in Health Management from the American University and is a frequent speaker on managed care issues. He lives and works in Madison, Connecticut and can be reached at 203 245 1249 or jpaduda@healthstrategyassoc.com
Copyright 2004 Health Strategy Associates/Joseph
Paduda - All Rights Reserved
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