Category Archives: Generic Drugs

Slight Increase in Average Medical Costs for Lost-Time Claims, Part 1

It’s that time of the year again, the time when I review the NCCI State of the Line Report.

As an added feature this year, I am including a look at the Medical Cost data, a new subject which I heard about back in February, when I attended NCCI’s 2017 Data Education Program.

First up is the distribution of medical costs by category. NCCI supports regulatory and legislative initiatives by providing State Medical Data Reports using data from their Medical Data Call.

For Service Year 2015, the distribution of payments across the various categories is based on data for all jurisdiction where NCCI provides ratemaking services, except Texas.

The key takeaway, as the following table will show, is that in 2015, physician costs were almost 40% (38%) of total medical costs, combined inpatient and outpatient hospital costs were approximately 30% (31%), and prescription drug costs were about 11%.

Table 1.

Table 1.

Source: NCCI’s State Medical Data Reports

Drilling down further, the distribution of physician costs for Service Year 2015, indicates that the bulk of the costs were associated with physical medicine, 30%, and surgery was associated with 24%, 10% associated with radiology, as shown in Table 2.

Table 2.

Table 2.

Source: NCI’s State Medical Data Reports

Getting even further, the next area the report covered was prescription drug payment changes over time.

The key takeaways here are the following:

  • In 2011, generic equivalents represented 47% of payments for all drugs prescribed. This increased to 58% by 2015, and driven largely by brand-name drugs.
  • Repackaged drugs now represent a small portion of overall drug payments because several states have implemented regulation on reimbursement.

Table 3.

Table 3.

Source: NCCI’s Medical Data Reports

NCCI analyzed the impact of prescription drug fee schedules on the cost of drugs by classifying states into one of four categories. States that had fee schedules were classified as Low, Medium, or High, based on the size of the Average Wholesale Price (AWP). The fourth category were states without a schedule.

The key takeaways here are:

  • Transitioning from not having a schedule to a low-fee schedule significantly reduces prices for WC prescriptions
  • Moving from no schedule to a high-fee schedule may increase drug costs, as shown in the following chart.

Chart 1.

Chart 1.

Source: NCCI’s Medical Data Reports

NCCI also looked at physician payments as a percentage of the Medicare reimbursement rate. In most states, they said, WC physician services are subject to fee schedules, just like the ones in group health and Medicare.

One way to measure physician costs across the states is to compare WC payments to the Medicare reimbursement rate.

The key takeaway from this is:

  • Prices paid relative to Medicare vary widely, from about 100% (Florida – 101%) to over 250%
  • Of the five jurisdictions with the largest percentage, all but Alaska (263%) are currently operating without a fee schedule
  • Countrywide the average is 150%

What does this mean for you?

While there are some positives in these numbers, especially with the cost savings from going to a low fee schedule for drugs, and an increase in the use of generic over brand-name drugs, and a decline in the percentage of repackaged drugs, medical costs are still very high for workers’ comp.

In the next post, I will look at the medical lost-time claim severity.

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TPP: What Impact Could It Have on Medical Tourism?

This is slightly off-topic, as far as this blog is concerned, but not that far off for the purposes of those of you in the medical tourism industry in general.

As reported last week on the Health Affairs Blog, the Trans-Pacific Partnership (TPP) trade agreement that Barack Obama is asking Congress to give him for fast-track authority, may be a threat to global health, according to Doctors Without Borders/ Médecins Sans Frontières (MSF).

MSF is deeply concerned that the TPP, in its current form, will lock-in high, unsustainable drug prices, block or delay the availability of affordable generic medicines, and price millions of people out of much-needed medical care.

They believe the public health repercussions of this deal could be massive.

Some of the concerns MSF has with several U.S. government demands in the TPP are:

  • the TPP would lower the standard for patentability of medicines.
  • It would force TPP governments to grant pharmaceutical companies additional patents for changes to existing medicines, even when the changes provide no therapeutic benefit to patients.
  • These provisions would facilitate “evergreening” and other forms of abuse of the patent system by lengthening monopolies and delaying access to generic competition.
  • Another concerning provision in the TPP involves so-called “data exclusivity” for biologics, a new class of medicines that includes vaccines and drugs used for cancer and multiple sclerosis treatment.
  • Data exclusivity blocks competing firms from using previously generated clinical trial data to gain approval for generic versions of these drugs and vaccines.
  • If pharmaceutical companies have their way, the TPP will block generic producers of biologics from entering the market for at least 12 years, during which patients would be forced to endure astronomical prices.

What impact the TPP would have on the growth and viability of medical tourism is unclear. We have seen so far, that with the trade deal between the US, Canada and Mexico (NAFTA) that there has not been any significant complications, as far as workers’ comp is concerned (see my posts, NAFTA, Work Comp and Cross-Border Medical Care: A Legal View and NAFTA, Work Comp and Cross-Border Medical Care: A Legal View: Update, as well as Cross-border Workers’ Compensation a Reality in California).

Those of you who send patients to Mexico can attest to its success or failure to improve medical care across the border.

Other trade agreements made in the region such as CAFTA-DR and the Panama-United States Trade Promotion Agreement, likewise will have to be assessed as to how it has impacted medical tourism to Panama from the US.

So until we know just how TPP will affect global health care, we will be unable to ascertain its impact on the growth and development of medical tourism as a viable alternative not just to general health care, but to workers’ comp as well.

The likelihood that Congress will give the president fast-track authority is up in the air, but we won’t know until the Senate takes up the agreement tomorrow.

Generic Drugs Boosting Pharmacy Costs for Workers’ Comp

Payers are having a tough time slowing the increases of generic drug prices, according to an article in last week’s Business Insurance, by Sheena Harrison.

Ms. Harrison reported that certain generic medications used in workers’ comp claims such as antibiotics, antidepressants and opioid painkillers, have seen price increases ranging from 8.5% to nearly 2,050% (yeah, that’s not a misprint or a typo on my part) in 2014 vs. 2013.

The increases in generic drug prices was revealed in testimony given at a US Senate Subcommittee hearing last fall on rising generic drug prices.

According to Ms. Harrison, Pharmacy Benefit Managers, third-party administrators and other workers’ comp service providers are noticing the higher prices as well.

One such third-party administrator, Broadspire, in Sunrise, FL, said that their average generic prescription cost increased 19% last year compared with 2013, as quoted by Carol Valentic, vice president of cost containment for Broadspire.

According to Valentic, the fourth quarter of 2014 was probably the first quarter that we saw that generic values were creeping up.

In the summer of 2011, I did my internship for my MHA degree with Broadspire in the Sunrise office and one of the projects I worked on was an analysis of physician/pharmacy-dispensed drugs costs within physician provider networks (PPN).

Pharmacy Benefit Manager Express Scripts has also seen price increases for drugs such as pain medications, muscle relaxants, anti-inflammatory drugs and prescriptions for heart disease and high blood pressure.

Monitoring drug utilization is one of the strategies being used to ensure that injured workers get generic medications for the appropriate time periods and dosages, as well as switching patients to cheaper medications that have the same outcomes.

Generic drug prices may be here to say unless federal lawmakers take action, according to the article.

Consolidation among pharmaceutical companies is given by workers’ comp experts as a top contributor to higher prices. They say that pharmaceutical company closures or mergers have allowed the remaining player to boost prices for medications that were previously made by several companies.

We all know that drug costs in the US, both generic and brand-name drugs, are much higher than they are overseas. In fact, my mother worked for a company that helped seniors get their medications cheaper from Canada, the UK, and Israel, so the idea that consolidation or mergers is the culprit is not telling the whole story.

As with the rising cost of health care in general, and the cost of surgeries in particular, it seems that drug costs are making workers’ comp claims costs even more of a problem for the industry to deal with.

When will the industry wake up to the fact that the American health care system is broken, corrupt, and expensive, wasteful, and fiscally out of control?

When will the workers’ comp industry learn, that if something can be had a lower cost with the same or better quality somewhere else, even if that somewhere is in another country, in a medical facility that caters specifically to American and foreign patients, that they should avail themselves of that opportunity?

Strategies such as monitoring drug utilization, as mentioned above, is just one more way the industry is doing the same things over and over again and expecting different results. We all know the real reason our health care system and the workers’ comp system is the way it is, GREED. And the notion that health care is just one more revenue stream, one more profit center for those who have capital and are making money off of the sick and injured of the nation.

I am willing to work with any broker, carrier, or employer who is sick and tired of being bled by the Wall Street vulture capitalists and the entire medico-legal system known as workers’ comp, to save money, and to provide the best care for their injured workers or their client’s employees, while at the same time, helping to break the monopoly of the American health care cartel.

You know where to reach me.