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Expensive generic drugs boost workers comp pharmacy costs

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Higher generic drug prices are showing up in workers compensation claims and payers can have a tough time slowing those increases. Certain generic medications used in comp claims — such as antibiotics, antidepressants and opioid painkillers — saw price increases ranging from 8.5% to nearly 2,050% in 2014 vs. 2013, according to testimony at a U.S. Senate subcommittee hearing last fall on spiking generic drug prices.

Pharmacy benefit managers, third-party administrators and other workers comp service providers say they've noticed the higher prices.

“The fourth quarter (of 2014) was probably the first quarter that we saw that generic values were creeping up,” said Carol Valentic, Sunrise, Florida-based vice president of cost containment for TPA Broadspire Services Inc.

She said Broadspire's average generic prescription cost increased 19% last year compared with 2013.

St. Louis-based PBM Express Scripts Inc. has seen prices increase for drugs such as pain medications, muscle relaxants, anti-inflammatory drugs and prescriptions for heart disease and high blood pressure, said Jennifer Kaburick, vice president of workers compensation product management and strategic initiatives.

Strategies to limit the effect of higher prices include monitoring drug utilization to ensure injured workers use generic medications for appropriate time periods and dosages, and switching patients to medications that are cheaper and have similar medical outcomes.

“With drug cost increases, utilization ... is always more important than looking at the actual individual drug cost,” said Jamie Harer, Orange, California-based product manager for pharmacy at Sedgwick Claims Management Services Inc.

Sources say increasing generic drug prices may be here to stay unless federal lawmakers take action.

“I think that the generics are still going to be on the less expensive side than the (brand name drugs), but I don't think we're going to see some of the big discounts that we've seen in the past,” Ms. Valentic said.

Workers comp experts point to consolidation among pharmaceutical companies as a top contributor to spiking prices. Pharmaceutical company closures or mergers have allowed remaining players to boost prices for medications that previously were made by several companies.

“Some of the smaller companies that were just producing generics are getting bought up or going out of business,” Ms. Valentic said.

The U.S. Senate Subcommittee on Primary Health and Aging held a hearing in November to discuss increasing generic prescription pricing. In a letter to the subcommittee, U.S. Rep. Elijah E. Cummings, D-Maryland noted that digoxin — a heart medication sometimes used in workers comp claims — increased from 11 cents a tablet in 2012 to $1.10 a tablet in June 2014.

“Why did this happen?” Rep. Cummings asked in the letter. “In 2012, there were three manufacturers, but one stopped producing. After this occurred, Lannett increased its price by more than 1,000%,” he said referring to Philadelphia-based Lannett Co. Inc.

“Manufacturers of generic drugs that legally obtain a market monopoly are free to unilaterally raise the prices of their products,” Drs. Jonathan D. Alpern, William M. Stauffer and Aaron S. Kesselheim said in a perspective published in November in the New England Journal of Medicine. “The Federal Trade Commission will not intervene without evidence of a conspiracy among competitors or other anticompetitive actions that sustain the increased price.”

Rita Wilson, CEO of Delray Beach, Fla.-based Medicare secondary payer compliance firm Tower MSA Partners L.L.C., said increasing generic prices have caused some concern for pricing Medicare set-aside accounts.

The Medicare Secondary Payer Act requires self-insured employers and insurers to be the primary payers for workers comp and liability claims involving current and prospective Medicare beneficiaries 65 and older. The U.S. Centers for Medicare and Medicaid Services advises workers comp payers to establish Medicare set-aside accounts to pay for future medical costs for a beneficiary's injury.

Costs included in a Medicare set-aside typically include an allowance for medications the injured workers is expected to use in the future. Ms. Wilson said such costs usually are based on the lowest priced generic drug, but rising generic costs have shifted which drugs are usually included.

In the case of digoxin, Ms. Wilson said a generic version manufactured by Cary, N.C.-based pharmaceutical company Covis Pharmaceuticals Inc. has jumped to $1.19 a tablet in the last year. But Lanoxin, the name-brand version of digoxin which is also made by Covis, costs 76 cents per pill.

While Tower previously may have included Covis' generic tablet in Medicare set-aside pricing, Ms. Wilson said the company has switched to using another generic digoxin version that has stayed at 17 cents a tablet. Tower is watching for signs that other generics that could shift from being the lowest-cost alternative to being among higher priced medications in certain categories.

“If you're a physician who's… saying that a generic can be dispensed, you could be paying more for the generic than the brand, so I thought that was interesting and ironic,” Ms. Wilson said of the potential for pharmacies to fill the more expensive generic.

Broadspire's Ms. Valentic said that prescription drug formularies, which typically favor generic drugs over name-brand versions to save costs, may need to start implementing drug manufacturer information in order to account for certain generic prices that are climbing significantly higher.

For now, experts recommend considering whether injured workers can be treated with medications that have similar therapeutic effects and cheaper costs.

Ms. Wilson added that if the lowest priced generic is still costly with a known, yet much less expensive therapeutic equivalent, pharmacists will make contact with the treating physician to discuss switching to the cheaper treatment.

“While it's true that the price for some generics have increased, on the whole, generic medications continue to deliver significant cost savings by providing cost-effective alternatives to brand name medications,” Express Scripts' Ms. Kaburick said in a statement to Business Insurance.