Monday, December 7, 2015

Prescription Drug Spending For State Employees Runs Wild, Despite Cost-Saving Efforts

Prescription drug costs under the state employees' health plan have run so wild that even a recently touted savings of $24 million a year — resulting from new restrictions on controversial compounded medicines — has been wiped out by an overall cost increase twice that large.

As soon as officials address one problem with prescription costs, another arises. It's like the arcade game Whac-A-Mole, in which a toy mole pops his head up, and as soon as you whack it down, another pops up from a different hole, and then another and another.

New state comptroller's statistics, obtained by Government Watch, show that taxpayers funded nearly $332 million in prescriptions for the 200,000 participants in the state health benefits program during the 12 months that ended June 30 — up about $53 million, or 18.8 percent, from the previous year's $279 million.

Moreover, the cost per participant jumped by an even higher percentage — 24.7 percent — because there were fewer state employees, retirees and family members participating in the program during the more recent year.

Comptroller Kevin Lembo, the elected official in charge of running the state employees' health plan, has been using the Whac-A-Mole analogy for the past year in conversations about the problems with prescription drug costs. He did it again in a phone interview Friday.

"Something else always pops up. You always feel like you're chasing the next problem, and you're battling people sitting in rooms thinking of how to take advantage of programs designed to support the health and life of others," he said.

Tyrone's comment:  This phenomenon, "Something else always pops up..." is referred to as ballooning.  In other words, when one loophole is closed the traditional PBM will look for another loophole to account for the lost revenue.  Traditional PBMs have internal staff whose sole purpose is to drive incremental revenue from client contracts.  To make matters worse, this process of hiding cash flows doesn't begin until the ink is dry on the contract!  The only sure fire way to avoid this pitfall [overpayments] is to enter into a fiduciary agreement. 

He attributed the latest $53 million escalation to a general skyrocketing of costs in the national pharmaceutical market, something that he said the state government has little influence over and that Congress needs to fix.

"The factors behind rising pharmacy costs include market consolidation, new pricing models and outright profiteering. Projections indicate no future relief as pharmacy costs are expected to continue to rise at an exorbitant rate in the coming years. Meanwhile, pharmaceutical companies are recording historic profits," Lembo said in written testimony he submitted this past week to the U.S. House Democratic Steering and Policy Committee. It's an all-Democrat panel co-chaired by U.S. Rep. Rosa DeLauro, who represents Connecticut's 3rd Congressional District.

Based on Congress' record of dealing with major health care issues, any quick solution is doubtful. But it appears that a Connecticut problem that reared its head in the past few years has been pretty much whacked.

That $24 million problem was compounded drugs — mixtures of medicines, typically produced by big, out-of-state compounding pharmacies, often in the form of topical creams for pain. Costs to Connecticut taxpayers for those medicines had exploded from $800,000 in 2012 to an estimated $24 million this year, with charges as much as $18,000 per patient for a 30-day supply.

Those medicines, not approved by the U.S. Food and Drug Administration, also were straining the prescription drug budgets of many states as well as the U.S. military and Department of Veterans Affairs as the compounding pharmacies exploited the lack of regulation.

In mid-May, Lembo imposed a "prior authorization" requirement for compounded medicines under which a prescribing doctor must demonstrate "medical necessity" before payment is approved by CVS/Caremark, the state's health benefits manager. A patient may appeal a denial.

Costs dropped from a peak of $3.1 million in April to $36,229 in July — and the average monthly savings on compounded drugs has been $2.2 million, according to a report to the comptroller by CVS/Caremark for the period from May 15 to Oct. 31.

The State Employees Bargaining Agent Coalition notified the state months ago that it was challenging the new policy on the grounds that it creates "too much interference in medical choices between a doctor and patient." But a Sept. 23 binding arbitration hearing has been postponed indefinitely while union representatives watch how the new procedure is working.

There have been only a handful of patient appeals so far, and the high-cost, out-of-state compounding pharmacies have been pretty much supplanted by local, low-cost pharmacies, which have been mixing most of the compounded drugs still being used, Lembo said.

An investigation by the office of state Attorney General George Jepsen is "active and ongoing" into the recent spike in costs for compounded medicines, an office spokeswoman said Friday.

It's hard to trumpet the cost-savings for those compounded medicines — not in the context of a $53 million increase in the prescription costs for which state employees, retirees and their dependents are responsible for only minimal co-payments.

Prescription co-payments for a 30-day supply of medicine range from $5 to a maximum of $35. That top co-payment of $35 is for a "non-preferred brand-name drug" that hasn't been certified as medically necessary by a doctor; it drops to $20 with a physician's certification.

Lembo said in his congressional testimony that prices for name-brand medications, as well as for long-established generic drugs, are rising at an alarming rate.

He gave as an example a recent huge increase in the price of Daraprim, a medicine that has been used for 62 years to treat a potentially fatal parasitic infection. Turing Pharmaceuticals, a startup company headed by the former manager of a hedge fund, acquired the drug recently and raised the price from $13.50 per tablet to $750.

"We applaud the profit motive in our free market society as a mechanism to efficiently distribute resources and drive innovation, but excessive profits can cause significant harm when applied unbridled to essential and lifesaving medicines in an uncompetitive marketplace," Lembo said in his testimony. "High costs are pushing certain treatments out of reach for some."

He asked that Congress strengthen anti-trust laws "to limit consolidation in the pharmaceutical industry and ensure that adequate competition remains to drive competitive pricing," and to reduce a backlog in FDA approvals of generic drugs. He said the state employees' health plan spent $8 million in the past year for the name-brand drug Nexium "as a result of a significant delay in the release of a generic version of the drug."

by Jon Lender

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