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How to fix the spiraling cost and utilization of compound drugs


Recent reports about the cost and utilization of compounded drugs in workers' compensation programs have many people in the industry concerned and talking – and for good reasons.

Various studies have shown that the average cost per compounded medication prescription increased 29.8% from the previous year. Perhaps even more astounding is that the California Workers' Compensation Institute (CWCI) reports that the use of compounded medications increased by 71.9% from 2012 to 2013, with per user, per year costs rising 126% over 2012.

At Sedgwick, we started reporting on excessive utilization of compounds a few years ago. While compounds still represent less than 5% of the total pharmacy costs, they can pose risks to employee health safety. With this in mind, last October – well ahead of the most recent published studies on compounding utilization – we introduced a comprehensive program specifically aimed at helping our clients better control this spiraling trend.

We developed our program by first asking why compounding was increasing so rapidly. Was it because there was a real need? Were compounds helping patients? Were they better therapeutic options? We looked to industry guidelines and evidence-based medicine as a foundation in developing our program.

Why payers are concerned

Compounded medications were initially created to address supply needs, or to provide therapies for rare conditions or, in extreme instances, for use when traditional medications were not working. However, the most common medication categories for compounded drugs today are anti- inflammatories, muscle relaxants, anesthetics and pain blockers. These medications are often provided as creams. Coincidentally, these are the same therapeutic categories we see most frequently in workers' compensation, often resulting in duplications of therapy for both oral and topical use.

What's troubling about current utilization patterns is that the vast majority of injuries currently using expensive compounds could be better treated with lower-cost generics or even over-the-counter medications. In addition, many payers are concerned about safety, as these drugs are not subject to FDA approval and efficacy; there is very little peer-reviewed or clinical evidence to support their use. Many of the compounded drugs dispensed as topical creams and used for pain cannot be absorbed through the skin, meaning that payers are wasting money and patients are not getting the relief they need.

Finding ways to manage utilization for compounded medications has been challenging. For example, some patients already using compounds believe in their efficacy and want to continue. Anecdotally we've found that about 20% of all recipients of a medication will say it "works" making it that much harder to deny it once the patient has received it. What's more, common strategies that could help, such as utilization review (UR), are not options in every state.

In addition, compounding pharmacies continue to heavily market their drugs to physicians and patients through direct visits to physician offices and at industry events. Some of these medications are dispensed directly at the physician's office while others are filled through a compounding pharmacy. Because many states do not have laws prohibiting physician dispensing and because these are not class II narcotics, physicians can dispense them from their offices and set the price for the medications.

What can be done?

Quite a bit can be done to control unnecessary utilization of compounded drugs. Look for a program that provides a comprehensive array of tools, interventions and services including:

  • Clinical review of compounds at the point of sale in UR states
  • Establishment of a workers' compensation formulary
  • Interventions and blocks at the pharmacy level when compounds not supported by evidence-based guidelines are prescribed
  • Identification of duplication in therapy classes often seen with topical compounds and oral medications
  • Desk-level tool kits for adjusters so they can identify when compounds have been prescribed and can institute appropriate interventions
  • Close collaboration with provider networks to ensure they are aware of compounding concerns and have the clinical and evidence-based medicine guidelines needed to choose the optimal therapy
  • Ongoing prospective and retrospective claims review
  • Patient and prescriber education and support
  • Quality control, including requirements for labeling these formulations with the exact ingredients and doses along with price regulations as a first step

An ongoing focus

Compounded medications are being used more frequently and are becoming a larger component of drug spend. With limited clinical evidence to support their use as first-line therapy, and strong concerns about safety, everyone must continue to use existing intervention and negotiation solutions and continuously enhance and build solutions to address the issue. We are diligently committed to focusing on the issue in order to consistently ensure patient safety and control costs.

What's your perspective on this topic?

Jamie Harer, Managed Care, Specialty Products Manager

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