Prescribing Success

One insurer’s advice on working effectively with pharmacy benefit managers.

January 30, 2014 Photo

Today’s prescription drug costs account for roughly nine percent of total workers’ compensation loss payments, or 19 percent of medical costs on average. Ironically, these percentages have not changed more than one percent in the last five years. So why all of the focus on opioids and prescription drug abuse, especially when it doesn’t seem to be impacting insurers’ pharmacy spends or bottom lines?

New research indicates that certain classes of drugs and prescribing practices can dramatically impact medical outcomes, return to work, and add to the overall cost of a claim. A recent study from Johns Hopkins University in the Journal of Occupational and Environmental Medicine demonstrated a nine-fold increase in average claims cost in association with long-acting (or time-released) opioids in the absence of increased pharmacy spend. In February, the California Workers’ Compensation Institute published a research brief that demonstrated increased indemnity costs, medical costs, and return to work times in association with physician dispensing. With a renewed research focus on claims outcomes, as well as increased media coverage, the use of Schedule II narcotics to treat chronic pain in workers’ compensation claims is finally getting the attention it deserves.

There are many programs and technologies that can help improve your ability to contain medical costs and work more effectively with your pharmacy benefit manager (PBM). Be aware that it may be financially irresponsible—and philosophically dangerous—to compartmentalize pharmacy cost containment programs as a separate component of medical care. To develop a pharmacy cost containment strategy that is not integrated with other medical programs might be a mistake. It is important to understand the current trends, and the most commonly used strategies, for containing medical costs in general.

At the core of the issue is the question of how to manage medical costs in light of constant increases in treatment prices and utilization. Buried below the surface are several other issues that need to be monitored, including: (1) healthcare reform, (2) procedural and diagnostic coding standards, (3) treatment patterns, (4) state regulations, (5) population dynamics, and (6) medical technology. The answer is surprisingly simple, but elusive. It lies in the determination of medical necessity.

Hypothetically, if we were to understand the safety and efficacy of a medical treatment and determine whether the treatment was reasonable, appropriate, and related to the workplace injury, we could then make an informed decision on the authorization of such treatment. As long as the claim’s jurisdiction statutorily supports an objective standard (i.e., evidence-based guideline) for treatment, leveraging against special interests and physician variability of opinion and practice, this would be true. Regardless of the approach, the necessary first step would be to increase due diligence on medical billing, with a strong focus on medical bill review (MBR) and PBM solutions.

A peek inside a contemporary claims adjuster’s cost containment toolbox would most likely reveal that 95 percent of the tools are designed to control price and employ cost containment strategies like utilization of discount networks, preferred provider organizations (PPOs), fee schedules, cost negotiation solutions, and wholesale distributers. It has long since been ingrained within the workers’ compensation community, perhaps as a result of industry reporting methods, to focus primarily on the price of treatments and cost inflation rather than the frequency of treatments. The importance of monitoring utilization of treatments and its impact on claims outcomes often is overlooked. Cost containment strategies that attempt to deal with utilization issues are scarce and immature and have considerable amount of variability in success.

Some utilization strategies that are popular today include:

  • Control of initial treating or change of provider
  • Utilization review
  • Peer-to-peer review
  • Independent medical examinations
  • Specialty networks
  • Official disability guidelines
  • American College of Occupational and Environmental Medicine alerting systems.

As states begin to adopt and support evidence-based medicine guidelines, the use of cost containment strategies aimed at decreasing utilization likely will become more popular and effective.

A big concern for 2014 is the potential introduction of new and stronger pain medications, such as Zohydro by Zogenix. Future drugs already slated for FDA approval may be available to injured workers and contain pure hydrocodone or mixtures with acetaminophen. Considering the increased health risk of these drugs and the potential for abuse, the need to have a strong foundational PBM platform is more important than ever. The ability to track, alert, and intervene on abnormal or aberrant prescribing patterns will need to occur in near real-time. Clinical programs triggered by specialized drug formularies such as utilization review, peer-to-peer review, and drug testing will be table stakes in the future. So, how can we reliably and effectively mitigate risks associated with changes in drug technology and prescribing patterns?

Pricing Controls

Considering that medical expenses on a claim can be fundamentally boiled down into a function of average treatment cost (price) multiplied by the number of treatments (utilization), let’s take a closer look at programs that should be discussed with a PBM to get the most effective and impactful results from both perspectives while also improving the quality of care for your injured workers.

Network Coverage and Discount Rates – The PBM contracts with pharmacies to offer discounts on the delivery and price of drugs. The more pharmacies that the PBM brings into the network, under contract, the higher the likelihood the injured worker will acquire the drugs within network at the onset of the claim and beyond.

Generic Conversion Program – The PBM should encourage the use of drugs that have a less expensive generic equivalent. A generic fill rate of greater than 70 percent should be expected.

Paper Bill Solution – The PBM should solicit out-of-network pharmacies from which the bill originates in an attempt to bring them into the network. Often, it is difficult for injured workers to change pharmacies during the course of the treatment. An out-of-network pharmacy also has little incentive to encourage cost-effective generic alternatives.

Home Delivery Program – The PBM should promote a convenient way to order maintenance medications and have them delivered to your home or office. The efficiency of this process along with the bulk purchasing power enables the PBM to offer prescriptions at a more economical price.

Utilization Controls

      Drug Formulary Management – The PBM should manage and facilitate a customized set of bill processing rules used to limit the availability of certain medications in relation to either the injury or the claim. These programs are used to flag drugs that need further review for authorization. Drug formularies can often decrease overall script volumes by greater than 10 percent just by filtering out unnecessary or unrelated prescriptions.

Utilization Review – The PBM will support or contract with another vendor to provide concurrent (point-of-sale) or retrospective intervention solutions that target specific problems dealing with drug interactions, dosage issues, duplicate therapy, substance abuse, or pharmacy/prescriber “shopping.”

Physician Outreach or Peer-to-Peer Review – The PBM will facilitate communication with the prescribing physician, usually via another physician with similar expertise or by a pharmacologist, to reinforce appropriate indications and deter use of medications with a high potential for abuse or misuse.

Educational Materials and Warning Letters – The PBM should help distribute letters and informational materials to the injured worker upon awareness of receiving drugs with a high risk for addiction or abuse. The information is provided on behalf of the carrier to help sensitize the injured worker to the risk of taking the drugs in high dosage for extended durations.

Drug Testing – The PBM will help facilitate noninvasive or invasive tests used to ensure compliance with the drug regimen and curb fraud, waste, and abuse scenarios. The most common form of test that is administered today is urine drug testing.

Without having these fundamental pharmacy programs in place, it would be difficult to make a significant impact on drug price and utilization. The ability to impact larger and more serious problems that affect claims outcomes, including physician dispensing, repackaging, compounding, pill mills, and utilization of highly addictive drugs, also would be at risk.

Ensuring Success

Keep in mind that any program a PBM offers will need to be monitored frequently. To ensure quality, reliability, and cost effectiveness of a PBM, you should consider tracking performance from your own business intelligence system separately from what is provided by a PBM.

A recommendation on metrics to track on a regular interval to help evaluate PBM performance would include, but not be limited to, script volume, average script cost, average number of scripts per claim, average pharmacy cost per claim, total pharmacy spend, number of scripts that are in-network, percentage of scripts that are generic equivalents, percentage of scripts that are Schedule II narcotics or opioids, and number of claimants enrolled in the PBM. Utilization of a third-party vendor also can assist in auditing the medication cost to ensure adherence to the contracted rates.

Additionally, to ensure success of the program, it’s imperative that the tools available through the PBM are utilized. Tools such as alerts for medications prescribed outside of the formulary need to be reviewed by a medical professional prior to pharmacy dispensing. These alerts often are the first indication that a case could be moving in the wrong direction and that the medical costs may increase. Intervening through a clinical review process, using dedicated or contracted nurse case managers to contact physicians, reviewing letters of medical necessity and applying evidence-based guidelines are essential to successful early intervention.

Lastly, good communication between the staff and the PBM must remain a top priority. It is essential to have dedicated points of contact on both sides of the relationship. Access to a dedicated account manager and a clinical pharmacist at the PBM is essential for trouble-shooting issues and identifying problems. Regular stewardship meetings and performance review sessions help everyone stay ahead of the business and provide an effective means for identifying future opportunity for performance improvements.  



About The Authors
Multiple Contributors
Jeffrey Austin White

Jeffrey Austin White is director of medical management practices and strategy for Accident Fund Holdings Inc. He has been a CLM Fellow since 2012 and can be reached at

Cathy Whitford

Cathy Whitford is manager and member of the medical management practices and strategy group at Accident Fund Holdings Inc. She has been CLM Fellow since 2013 and can be reached at  

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