A major cost component of all employer health plans is the price of prescription drugs. Most health plans include formularies with tiers for generic and name-brand drugs, and the plans also include options for compounded drugs, defined by the Professional Compounding Centers of America as medications made based on a practitioner's prescription in which individual ingredients are mixed together in the exact strength and dosage form required by the patient. The cost of compounded medications is also driving up workers' compensation costs across the country.
In the state of Texas, for example, a House committee asked the Division of Workers' Compensation (DWC) to look at compounded drug prescriptions for injured employees. The division examined its data on pharmacy billing and an ongoing audit of doctors' practices, and it found that the cost of compounded drugs doubled from 2010 to 2014, and the average cost per prescription had risen to $829 in 2016.
According to DWC, the numbers were concerning because compounded drugs aren't recommended as first-line medications in treatment guidelines for injured employees. After reviewing DWC's report, members of the House Committee on Business & Industry asked DWC to address the issues through a new rule. In response, DWC recently announced an informal draft rule to require that compounded drugs be preauthorized.
"We're looking to DWC to develop a rule that maintains access to these drugs but helps prevent fraud and unnecessary use," said Chairman Rene Oliveira. "And we're encouraging DWC to get input from carriers, doctors, patients, pharmacists and other stakeholders throughout that process."
Related: Why workers' compensation treatment guidelines matter
|Drug safety concerns
A complicating factor for most health plans is that compounded drugs generally are not approved by the U.S. Food and Drug Administration (FDA), and the FDA does not verify their safety, effectiveness or quality. The FDA has found that the labeling of compounded drugs often omits important information and that poor compounding practices can result in serious drug quality problems, such as contamination or medications that do not possess the strength, quality, and purity they are supposed to have. Additionally, the FDA has reported its concern that some compounders produce drugs for patients even though an FDA-approved drug may have been medically appropriate for them. Recognizing that some patients do need compound drugs for valid medical reasons, such as allergies, state pharmacy boards regulate compounding pharmacies in each state.
Given the safety concerns, Workers' Compensation Commissioner Ryan Brannan said the preauthorization process strikes a sensible balance.
"We want to make sure the use of these drugs is being reviewed and that physicians are considering efficacy and appropriateness of alternatives while still ensuring that patients who need compounded drugs will still be able to get them," Brannan said.
Concerns about compounded drugs aren't unique to the Texas workers' compensation system. In 2014, the Employee Retirement System of Texas began requiring preauthorization for all compounded drugs costing $300 or more. The change reduced ERS expenditures on those drugs from $35.7 million in Fiscal Year 2014 to $1.2 million in Fiscal Year 2015. In January, ERS tightened the requirements even more, requiring preauthorization for compounded drugs costing more than $50.
Brannan said there will be multiple opportunities for public and stakeholders to have input on the rule. He also noted that DWC will educate providers on the steps for preauthorization before any change takes effect. The agency is accepting comments on the informal rule through July 7.
|Compound drugs by the numbers
A May report by DWC's Research and Regulation group found that:
- The number of compounded drugs increased from 18,020 prescriptions in 2010 to 26,380 in 2014.
- The total cost of compounded drugs increased from $6 million in 2010 to $12 million in 2014.
- The average cost per compounded drug prescription increased from $356 in 2010 to $829 in 2016.
- Almost a third of compounded drug prescriptions were to treat back injuries.
For more information visit the Texas Division of Workers' Compensation website.
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Rosalie Donlon
Rosalie Donlon is the editor in chief of ALM's insurance and tax publications, including NU Property & Casualty magazine and NU PropertyCasualty360.com. You can contact her at [email protected].
