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Workers' Compensation

How Washington State Is Beating the High Cost of Prescription Drugs

Washington State Combines Preferred Drug List and Volume Buying

John Stahl By John Stahl, Esq.

Like the weather, increasingly high costs of the deluge of prescription drugs prompt complaints by everyone who provides workers’ compensation coverage and benefits. A November 16, 2011 session at the Workers Compensation Research Institute’s (WCRI) 2011 Annual Conference showed how precipitation-prone Washington state transformed the flooding rains of pills into light showers.

WCRI economist Dongchun Wang summarized the findings of a WCRI study on prescription drug costs. Dr. Jaymie Mai, who is the pharmacy manager at the Washington State Department of Labor & Industries, explained how the workers’ compensation system in Washington manages its prescription drug program. Eileen Auen of PMSI discussed national issues related to containing workers’ compensation prescription drug costs.

WCRI Study

Wang shared the results of a 2011 WCRI study that compared prescription drug costs in Washington with 17 other states.

Findings included that Washington’s costs were 40 percent less than other states’ costs; only Massachusetts had lower prescription drug costs than Washington.

The study’s scope encompassed prescriptions that were filled through March 2008 for compensable injuries that occurred between October 2005 and September 2006.

According to the study, 446,000 prescriptions were provided for 81,000 claims in Washington that required more than seven days of lost time. This is compared to a comparable total population of 740,000 claimants in the other 17 states receiving 4 million prescriptions.

Public policies that reduced the cost of dosing up Washington workers’ compensation claimants included:

  • A lower than typical pharmacy fee schedule
  • Requiring utilizing generic drugs in many cases
  • Reducing the rate of physician dispensing (i.e. pill mills)

Wang described the public policy regarding generic drugs as “encouraging use of generics that are equally effective but less expensive than brand names.” In other words, generic drugs will not be prescribed at the expense of a claimant’s care.

Wang added that only six percent of the prescriptions that are filled in the workers’ compensation system in Washington are brand names. The median percentage in the other states in the study seemed to be approximately 15 percent. Only three states had rates that exceeded 20 percent.

Warehouse Club Approach to Prescription Drug Management

Mai’s description of how Washington managed its workers’ compensation prescription drug program reflected some aspects of shopping at warehouse clubs in that this approach included purchasing good-quality generics and utilizing economies-of-scale.

Another aspect of Washington’s good fiscal management is what Mai described as a “competitive pharmacy fee schedule.”

Mai’s comment that Washington measured its total workers’ compensation prescription drug cost by multiplying the utilization of these medications by the price for those prescriptions showed that a reasonable fee schedule is only part of the solution; heavy utilization may keep total costs high even in states with low fee schedules.

Mai additionally shared the statistic that Washington’s approach resulted in prescription drugs representing only approximately 4 percent of that state’s roughly $600 million in 2010 workers’ compensation medical services.

The Prescription Drug Program (PDP) that Washington enacted several years ago required state-run health-care programs, such as the workers’ compensation and Medicaid systems, to consolidate their prescription drug programs. Double-digit increases in these agencies’ prescription drug costs helped motivate the program.

The PDP also resulted in the Pharmacy & Therapeutics (P&T) Committee to determine which drugs the participating state agencies could purchase. The committee composition is always four pharmacists, four physicians, one nurse practitioner, and one physician’s assistant.

The committee’s role includes helping develop the evidence-based Preferred Drug List (PDL). The PDL provides the basis for buying drugs within Washington’s health care program.

The process that is conducted when a PDL candidate is considered consists of:

  • The Oregon Health Science University (OHSU) preparing a report under a contract with Washington
  • P&T Committee staff members making a recommendation based on the OHSU report and on a cost analysis
  • Directors of the participating agencies approving the drug for the PDL
  • Notice of PDL update released
  • Candidate included in PDL

Administering the PDL program also involves registering physicians in the Therapeutic Interchange Program (TIP) by endorsing the PDL. A physician doing so generally requires that a Washington pharmacy interchange a drug on the PDL if the physician has prescribed a drug that is not on the PDL. The TIP requires that the pharmacy notify the prescribing doctor of the substitution.

(Mai reported that more than 50 percent of the overall prescription drug cost in the Washington workers’ compensation system is spent on PDL drugs.)

Refills of certain types of drugs receive exemptions from the mandatory interchange. These include antipsychotics, antidepressants, and chemotherapy drugs.

A physician can also circumvent TIP requirements by designating “dispense as written” on a prescription. It is likely that doing so is subject to review.

Mai also shared how Washington was combating pill mills. One primary reform was eliminating the profit motive by limiting the reimbursement that physicians could receive for drugs to the physician’s cost for that drug.

Another change was a program that reimbursed a pharmacy for the first filling of a prescription regardless of whether the workers’ compensation claim for that prescription was accepted. This reform also facilitated meeting the general workers’ compensation objective of a claimant receiving timely benefits.

Mai demonstrated as well how better regulating practices related to prescribing opioids reduced deaths that were attributable to those pain medications. These programs included requiring urine testing to ensure that people who were prescribed opioids were taking, rather than hoarding or otherwise misusing, them.

Mai additionally reported that 89 percent of the prescriptions in the workers’ compensation program in Washington were for generic drugs. She emphasized that this statistic applied “across the board.”

Mai also illustrated that that utilization of generic drugs was significantly higher than many other states’ rates. One example was a 54 percent rate of prescribing generic drugs in Florida.

Generic Presentation

Auen continued the topic of generic drugs by discussing others states’ success implementing the same reforms as Washington. She reported that 34 states have mandates regarding generic drugs, which typically cost 70 percent less than brand-name equivalents.

This guideline requires essentially that “if there is a generic equivalent, it must be used in most cases.”

This presentation also addressed the related topic of utilization and identified pill mills as a concern. It reported that 16 states have acted to curb physicians dispensing prescription drugs. A provided example of an obstacle to that reform was strong physicians lobbies that could hinder efforts to shut down pill mills.

Prescription for Success

The presenters’ information showed that Washington’s climate-control efforts are succeeding. It is equally true that the environment in most states have common elements.

However, each state’s reforms must respond to that area’s specific challenges and must be administered properly after they are implemented.

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