Tag Archives: prescription drugs

New Way to Lower Healthcare Costs

Managers are more likely to limit rental cars to $30 a day than limit an open heart surgery to $100,000 — for ethical and regulatory reasons, many executives steer clear of involving themselves in healthcare decisions, other than selecting the broadest possible network access. But few expenses that executives know so little about matter more than those involved in healthcare do.

This article speaks to a cultural shift that could provide tremendous impact for employers. They can now lower costs while also improving outcomes.

Until now, employers have used two main strategies:

–They offloaded costs to employees, hoping that giving them more skin in the game would reduce their spending on healthcare. But the continuing lack of transparency about healthcare costs, combined with costs that rose faster than employers shifted them, resulted in insurance picking up more cost and consumerism being driven down.

–Employers also invested in wellness programs. But wellness programs are most attractive to the already healthy. And they attempt to reduce how often enrollees encounter the system. But we know that everyone will encounter care at some point. It is each encounter’s volume and cost that is at the heart of this out-of-control system.

The new, better approach was demonstrated in a whirlwind, 48-hour trip I took with some incredible healthcare leaders.

First, we met with the executives of Rosen Hotels in Orlando, who have saved hundreds of millions of dollars compared with average employer healthcare costs. Rosen’s single-digit employee turnover would delight most employers, but it is spectacular in the hospitality industry. Rosen achieves this turnover with a benefit-rich plan most employees would drool over: e.g., no-cost prescriptions, $750 max hospital out-of-pocket.

How does Rosen accomplish this? First, its healthcare thinking is based on what it wants to achieve rather than what it has to provide. Beginning with the CEO, Rosen’s top executives really care about every one of their employees, as evidenced by the more than a few employees who have been there for 40-plus years. (Remember, this is a hotel chain, not a hedge fund with six-digit salaries). The strategies deployed vary, but they mainly support making the highest value care as accessible as possible.

Value—a fair return or equivalent in goods, services or money in exchange for something—is seriously lacking in American healthcare. Rosen took it upon itself to provide healthcare whenever and wherever possible, using its clout to lower costs. The company arranged special prescription drug discounts with Walmart. Rosen has on-site medical directors who personally engage with each employee’s health. The directors visit employees in the hospital and help arrange home delivery of costly specialty medications from lower-cost pharmacies. The company monitors and supports sick employees’ recovery and progress. It also built a health-and-wellness center for all employees and dependents with primary care, prescriptions, fitness instruction and more. I know all this sounds expensive, but the impact far outweighs the cost.

The second part of our adventure involved a flight to the Caribbean island of Grand Cayman, just south of Cuba, a beautiful tropical setting an hour-long flight from Miami (and with direct flights from a dozen other U.S. cities). The morning after our late arrival, we enjoyed the beautiful sunrise for exactly 20 seconds before we were bused to a facility called Health City Cayman Islands (HCCI). The single building on 200 acres (with significant future expansion plans) is clean, new and functional, though it is not nearly as grand as many U.S. mega-hospitals. Now two years old, HCCI is a joint venture between Ascension Health (a non-profit U.S. health system) and Narayana Health, a top Indian health system based in Bangalore. HCCI’s Indian roots are very important, because that country has no national healthcare or insurance system. The Indians have a novel approach to healthcare: You pay for it.

Narayana Health, which has achieved Joint Commission International (JCI) accreditation, performs a volume of procedures unprecedented in most hospitals. This volume is produced by a highly experienced team with quality outcomes that equal or exceed the best U.S. hospitals, but the team does it at far lower cost. Dr. Devi Shetty, Narayana’s founder and a cardiologist who has performed more than 25,000 heart surgeries, is focused on reducing the price of an open heart surgery to $800. (It currently sits around $1,400). Compare that with a 2008 Millman report that pegs U.S. open heart surgery costs around $324,000.

Some employers—Carnival Cruise Lines, for example—are so convinced of HCCI’s value (better health outcomes at far lower cost) that they will pay for all travel, including a family member’s accommodations for the length of a stay, and often waive an employee’s out-of-pocket costs associated with the procedure.

While HCCI’s pricing is higher than its Indian sister facility, many people could afford to pay for HCCI’s care with their credit card, if that were necessary.

HCCI charges a single, bundled fee that covers all associated costs, plus the cost of most complications — the director says, “Why should the patient pay for something if it was our mistake?” Compare that attitude with that at U.S. facilities, which have financial incentives to deliver as much care for as long as possible, and which get paid more if they make mistakes. HCCI’s upfront pricing model creates a serious incentive for efficiency and quality, because the facility is financially responsible for complications, infections and extra tests.

Patients and purchasers (i.e. employers and unions) should realize that nearly all U.S. healthcare—hospitals, doctors, drug companies and even insurance carriers—are structured to benefit from more care, rather than good, efficient or innovative care.

This means that purchasers and patients must use any available levers to get the best healthcare value they can. As Rosen and HCCI have proven, those levers are increasingly available.

Next Tsunami of Work Comp Payments

2009 was a milestone in workers’ comp. In that year, the Centers for Medicare and Medicaid Services (CMS) formally announced that it would review future prescription drug treatment in Workers’ Compensation Medicare Set-Aside (WCMSA) proposals based on “appropriate medical treatment as defined by the treating physician.” While the U.S. culture and Centers for Disease Control and Prevention (CDC) had already noticed the prescription drug epidemic, this new requirement more clearly highlighted high-cost drug regimens that were doing more clinical harm than good.

Yes, the monthly drug costs were already known to be expensive. Yes, reserves often had to be raised annually. But until the workers’ comp industry had to follow explicit rules to calculate the lifetime cost associated with continued inappropriate polypharmacy regimens, the problems hadn’t really registered.

The new requirement dramatically changed the ability to settle and close a claim, so addressing the overuse and misuse of prescription drugs, primarily related to non-malignant chronic pain, became a white hot priority. The financial exposure highlighted by the WCMSA was a tsunami that changed the contours of the claims shoreline.

Well, another milestone has been achieved for workers’ comp. I have been talking about it, as well, over the past three years, because I could see the riptide indicators of the next tsunami to hit. And now the surge is about to hit the shore.

This next workers’ comp tsunami? Death benefits that will be paid because of drug overdoses.

This has already been affirmed in a handful of states, among them Pennsylvania (James Heffernan), Tennessee (Charles Kilburn) and Washington (Brian Shirley). Death benefits have been denied in other states, including Connecticut (Anthony Sapko) and Ohio (John Parker). I’m sure this is not a complete list. The list shows how individual circumstances and jurisdictional rules can drive different decisions, but what is not up for debate is whether payers face an issue concerning injured workers dying from an overdose (intentional or unintentional) of prescription drugs paid for by workers’ comp.

The game-changer could be a new decision in California, South Coast Framing v. WCAB. The full Supreme Court decision can be found here, and a good article that gives additional context can be found on WorkCompCentral (requires a subscription).

To summarize, Brandon Clark died on July 20, 2009. The autopsy reported his death “is best attributed to the combined toxic effects of the four sedating drugs detected in his blood with associated early pneumonia.” Elavil, Neurontin and Vicodin were being prescribed by his workers’ comp physician, while Xanax and Ambien were prescribed by his personal doctor. Of that list, the four sedating drugs are Elavil, Vicodin, Xanax and Ambien — obviously a mixture of workers’ comp and “personal” drugs.

The qualified medical evaluator (QME) doctor ascribed the overdose to the additive effect of Xanax and Ambien and not the workers’ comp drugs. However, he allowed that Elavil and Vicodin could have contributed (the deposition quotes on pages three and four remind me of a Monty Python skit, as he tried inartfully to not provide apportionment). So … what is the strength of causality between the industrial injury and death? Tort is much more precise in its understanding — cause, in fact, and proximate cause. Workers’ comp (which is no-fault) is not tort, and neither is its definition of causality — contributing cause of the injury.

Did Clark misuse or overuse the drugs through willful misconduct? Possibly. Should one of his physicians have recognized the additive sedative effects from the combination of drugs and done something different? Probably. Was Clark trying to address continued legitimate pain that originated with his workplace injury? Likely. Is this a tragedy? Definitely.

So the decision came down to whether the workers’ comp drugs (Elavil and Vicodin) could have been part of why Clark died.

The Court of Appeal concluded that Elavil only “played a role” and was not a “significant” or “material factor.” The Supreme Court found the evidence to be substantial that Elavil and Vicodin, to some degree, contributed to his death. Therefore, they awarded death benefits to Clark’s wife and three children.

What does this mean? At least in California, it means that the bar of establishing causality (did workers’ comp drugs somehow contribute) is not as high as you might have expected. There is no further debate because this is a Supreme Court decision. Does that mean more death benefits are to come in California? In a highly litigious state where representation is commonplace. And prescription drug use for chronic pain is an overwhelming problem. Hmmm …. My “magic eight ball” is in for maintenance, but my educated guess (I am not an attorney) would be yes.

What about other states? Well, every state has different rules and case history, but because trends often start in California, and the Supreme Court was articulate in its decision-making process, it’s possible this causes a re-examination by all parties. The fact that some states already have established case law to grant death benefits could be a compounding effect. Therefore, it’s a definite maybe.

This may be an isolated case that has no repercussions in California or elsewhere. On the other hand … Consider this your RED FLAG warning for the riptide that precedes the tsunami. And you thought paying for drugs was expensive!

Prescription Drug Abuse – Progress In Sacramento

On May 30, the California Senate passed Senate Bill 809 (DeSaulnier) unanimously. This bill has as its primary goal the continued funding of the Controlled Substance Utilization Review and Evaluation System (CURES) in the California Department of Justice. Over the past year, considerable attention has been brought to the issue of abuse of prescription painkillers nationwide and across all benefit systems. Well-publicized research in California by the California Workers' Compensation Institute (CWCI) and multi-state analyses by the National Council on Compensation Insurance, Inc. (NCCI) and the Workers' Compensation Research Institute (WCRI) have quantified the tragic effects of over-prescribing these medications.

SB 809 seeks to do more, however, than simply develop a stable funding source for this program. The recent Senate action, while important, demonstrates that not all issues surrounding the CURES program are likely to be resolved in 2013. As a series of investigative reports done by the Los Angeles Times pointed out, participation in the CURES program by physicians is not mandatory, and there is no adequate mechanism in place to report unusual prescribing patterns by physicians to the Medical Board of California. While the funding legislation for CURES will address the latter problem, there is still no requirement that prescribers access the database before prescribing a Schedule II – IV controlled substance. However, all prescribers and dispensers will be required to register with the CURES system, which in and of itself is an important development for the Department of Justice and the Medical Board in their efforts to identify and investigate abusive prescription patterns and to combat diversion of the medications for illicit purposes.

Also, stripped from the bill was a tax on manufacturers of controlled substances that would have been used for enhanced law enforcement capabilities throughout the state. This was a critical development that policy makers still need to address, either in this legislation or through the budget process.

Even though a targeted tax on manufacturers is not palatable to the Legislature, the need to fund better enforcement of the laws governing illicit sales of prescription drugs remains a high priority. The funding in the current bill will allow the CURES program to be maintained and improved, but law enforcement will still not have what it needs to investigate physicians and pharmacists who are violating the law and bring them to justice.

While California's workers' compensation system does not have the same level of protections against prescription drug abuse as other state workers' compensation systems, there are resources at our disposal to limit the danger of these medications.

The Medical Treatment Utilization Schedule, utilization review, and Independent Medical Review (IMR) recently added by Senate Bill 863 will assist payers in their effort to curb overutilization of these medications while still addressing the very real clinical need for relief from acute pain and management of chronic pain resulting from an occupational injury. The Division of Workers' Compensation is expected to release new guidelines on pain management later this year that should further assist in this process. And the workers' compensation system, like all other healthcare financing programs, will benefit from the enactment of SB 809. It's a good start, but we are a long way away from declaring this problem solved.

The abuse of high powered prescription pain medication is a public health crisis with workers' compensation implications. The path to a solution requires the active participation of the medical and pharmacy communities, drug manufacturers, law enforcement, medical benefit payers — whether public programs, private group health plans or workers' compensation insurers and self-insured employers — and state and federal agencies and boards overseeing the development and use of these medications.

Progress is being made, but more work needs to be done. The goal is not simply for payers to be better able to say “no”. The goal is also not simply being able to avoid the costs of these medications and the complications their abuse creates and have those costs be borne somewhere else. The goal is delivering the highest quality treatment for an injured worker. A back injury, for example, doesn't automatically require surgery in all circumstances any more than it requires an injured worker to face the prospect of drug dependency.

If we use the tools at our disposal compassionately and intelligently and if we continue to press policy makers and regulators to take all steps necessary to protect patients from the improper use of these medications, then we will be able to measure success in more than dollars saved. If Governor Brown gets SB 809 on his desk and signs it, it will become effective immediately. That's a good first step, but there will still be much work to do.

5-Year Analysis Of Pharmacy Burglary And Robbery Experience

Background
Burglaries and robberies represent a significant expense to pharmacies in the United States. Beyond direct insurance costs, which are driven by loss experience, pharmacists experience financial, business interruption and psychological costs. Pharmacists are concerned about armed robberies, and even finding that a store has been burglarized overnight can be upsetting and cause the expenditure of thousands of dollars in an effort to prevent reoccurrence. Beyond what is covered by insurance, customers pay deductibles that can easily be exceeded as a result of criminal efforts to gain entrance. Pharmacists that are victimized face hours of dealing with police, the Drug Enforcement Administration, board of pharmacy, contractors and their insurance company. As state and national efforts increase to address the underlying problem of prescription drug diversion, pharmacists face increasing administrative and regulatory compliance costs.

When we seek methods to effectively combat the problem, it is important to understand the larger problem of prescription drug diversion and how it fuels pharmacy burglaries and robberies. Described by the Centers for Disease Control as having reached epidemic proportions in the United States, demand for prescription narcotics, coupled with a widely available supply, create an environment that is ripe for criminal activity.

  • While the U.S. represents only 4.6% of the world's population, we consume 80% of the global opioid supply.
  • Five million Americans use opioid painkillers for non-medical use.
  • We experience almost 17,000 deaths from prescription narcotic overdoses annually. In a 4 year period, that is more deaths than we experienced during the Vietnam War.
  • Morphine production was at 96 milligrams per person in 1997. By 2009, that number increased eight-fold.

The origins of the problem are complex, but are based on a cycle of over-prescribing that has occurred over the past two decades. While well intentioned, liberal prescribing coupled with aggressive marketing, incentives and even encouragement to physicians to relieve pain at all costs sparked the fire. Unchecked by adequate physician education on drug diversion and dependency, and a lack of appropriate chronic pain management protocols, demand and dependency increased. As demand increased, so did production levels, opportunities for profit and creative methods of diversion.

Pharmacy crime involves every part of the distribution chain from manufacture through wholesale, retail, and ultimately to the end user. Pharmacists have been victims of deceptive practices, prescription fraud, employee diversion, burglaries and robberies. According to the Centers for Disease Control, prescription drug diversion, measured by drug overdose deaths and pharmacy crime, is at epidemic proportions.

National And State Actions Taken To Address The Problem
Significant efforts continue to be taken at the national and state levels to combat the problem, with various degrees of success. Each of these has a direct impact on how customers conduct business. Unfortunately, most will have no short term impact on reducing the probability of pharmacy burglaries, robberies or employee diversion.

Prescription Drug Monitoring Programs — Inputting data on prescriptions written and prescriptions filled, particularly for opioid based narcotics is an effective measure for identifying doctor shoppers, abusers and other drug seekers. While the programs are in place in 49 states, most do not connect with each other. This allows a drug seeker to get a prescription in one state and have it filled in another. Use of the program varies significantly by state between being mandatory, voluntary or somewhere in between. In addition, many of the programs are set up on a “free trial” basis for 5 years. As the trial periods are expiring, funding is becoming difficult to continue the programs, notably in California and Florida. Most pharmacists support these programs; however, there has been some resistance by major chains and various state medical associations — in large part objections are based on the time it takes to enter data.

Drug Courts — Intended to allow persons committing crimes to recover, many of these courts eliminate or significantly reduce sentencing for burglars and, in some cases, robbers. This results in a significant level of resentment by pharmacists who are victims of crime.

Drug Enforcement Administration Strike Forces — In the past several years, the Drug Enforcement Administration has shifted a major portion of resources from illicit drug enforcement activity to prescription narcotics. One of the focal areas has been on monitoring the flow of narcotics to pharmacies. These efforts have resulted in sanctions and subpoenas against distributors such as Cardinal Health and Amerisource Bergen, as well as arrests of physicians and pharmacists. In some areas of the country, there are complaints of narcotic shortages as distributors restrict shipments. This pushes drug seekers to other states and areas where enforcement is not as aggressive.

Changing Prescription Patterns — Where states have increased penalties against prescribing physicians and pharmacists for filling prescriptions when they “should have known better,” some physicians have decreased or stopped writing scripts for certain narcotics and some pharmacists have pulled them from the shelves. As chronic pain treatment guidelines are implemented and physician education on drug diversion and addiction increases, we can expect tighter controls on the management of prescription narcotics.

Treatment For Abuse And Addiction — A reality in the war against prescription narcotic diversion is that the demand exists and that the long term solution requires treatment programs that take time, cost money and are much more difficult to manage than writing and filling prescriptions. Until these programs become more available and acceptable, drug seekers will continue to find ways to obtain narcotics, including committing crimes against pharmacies.

Key Findings Presented In This Report
This report covers a 5-year analysis of burglaries and robberies occurring to Pharmacists Mutual customers.

These claims impact our bottom line. Data collected comes from claims department data as well as interviews with each customer victim by our claims department over the past two years. In many cases (where requested by the customer or due to the nature of the loss), follow-up investigation is also conducted by risk management. Information obtained has been used to educate customers, underwriters and field representatives about how the crimes are committed and preventive measures that can be employed to minimize the extent of loss.

What we've learned:

  • Frequency of pharmacy crimes (81% of PMC crimes are break-ins vs. armed robberies) has been relatively flat over the past 5 years compared to policy count. While we've seen an 18% increase in crimes over the past 5 years, policy count has grown by 21%. RxPatrol, the only other national pharmacy crime database, has seen a slight decrease over the past 2 years, however, 60% of RxPatrol reports are for armed robberies, primarily to national chains, and much of this decrease may have been as a result in aggressive measures to address the robbery problem in chain stores such as Walgreens and CVS.
  • Total incurred and average costs have increased steadily over the past 5 years.
  • Almost 70% of the crimes we see are under $5,000. 50% of costs come from the 9% of claims that are in excess of $25,000.
  • In 52% of cases, criminals enter through the front door or front window. One indication is that video surveillance, while at times helpful in identifying perpetrators, does not deter crime. Some of the most expensive burglaries have been those where criminals entered through the roof. Examination of these and side wall entries indicates the approach targets areas of the pharmacy that may not be adequately protected by alarm systems, or to circumvent motion detectors.
  • In 1/3 of cases, police respond within 5 minutes. When they do, arrests result in 21% of cases. Unfortunately, most crimes take less than 2 minutes. Bottom line, if they can get in, chances are they will be successful and will get away. In areas of the country where police response times exceed 30 minutes (rural and municipalities with budget constraints), pharmacies are effectively unprotected.
  • Most state boards of pharmacy require alarms, but situations remain where alarms are not present, are not functional or are ineffective. In many cases, maintenance and testing are non-existent, and there are suspicions that alarm codes may have been compromised.
  • If a criminal wants to try and burglarize or rob a pharmacy, the pharmacy will likely incur property damage. However, the size of the loss can vary from a few hundred dollars to tens or even hundreds of thousands of dollars depending on control measures that are in place.

    What really makes a difference in keeping loss costs low?

    • A well-designed, tested and reliable alarm system. Alarm codes need to be protected and police response needs to be adequate.
    • Protecting doors and windows to slow down or eliminate the possibility of entry. If the crooks cannot gain entrance within a few minutes, they will usually leave.
    • Installing a safe. The overwhelming majority of criminals are in and out in less than 2 minutes. Locking target drugs in a sound, well-secured safe can make a significant difference in the size of the loss.
    • Having a plan and training employees on what to do if a robbery occurs. This can mean the difference between life and death.

What We've Done At Pharmacists Mutual And What We Will Be Doing In 2013

  • Over the past two years, we have met with over 15 pharmacy associations and buying groups, have published numerous white papers and articles in our semi-annual publication “Pharmacists Mutual Risk Management” and have spoken with hundreds of customers who have experienced pharmacy crime first hand.
  • We have identified vendors of security products based on our loss experience. Where possible, we have arranged discounts for PMC customers who use these services.
  • In the fourth quarter of 2012, we provided training to underwriters about pharmacy trends and tools to assist them in evaluating protection levels at pharmacies and to address specific deficiencies.
  • For 2013, we will be implementing a pharmacy security evaluation matrix. The matrix, based on probability and loss severity data, will be used to assist pharmacies in assessing risk and in underwriting evaluation.
  • We plan to continue publication and education efforts.

Pharmacy Crime Frequency

Number of Pharmacy Commercial Policies

National Data

Pharmacy Crime Total Incurred Claims Cost

Pharmacy Crime Average Incurred Claim Cost

Frequency by Size of Incurred Loss

Robbery vs. Burglary

Method of Entry

Average Cost by Method of Entry

Video Surveillance

Arrest Rates and Video Surveillance

Police Response Times

Arrest Rate by Time of Response

Alarm Notification

Alarm Response Average Cost

Alarms and Sales