Tag Archives: Drug Utilization

What are the economic costs of the opioid crisis for employers?

In a Society of Actuaries report, authored by Milliman, the total economic cost of the opioid crisis was estimated to exceed $631 billion from 2015 to 2018. Much of this cost was borne by employers, many of which offer health and disability benefits that individuals with opioid use disorder (OUD) rely on.

Within this estimate, lost productivity costs due to absenteeism and decreases in labor force participation resulting from nonmedical opioid use were found to total at least $79 billion from 2015 to 2018. Excess healthcare costs for commercially insured patients affected by OUD, a large portion of which are borne by employers, totaled $67 billion over the same period. When considering other types of opioid crisis-related costs that are more difficult to measure, the total cost may be substantially higher.

In this article, Milliman’s Stoddard Davenport, Matt Caverly, and Katie Matthews discuss what the economic cost of the opioid crisis has looked like for employers.

Costs and comorbidities of opioid use disorder

Opioid use disorder (OUD) may have added $10.8 billion to the cost of treating commercially insured patients across the United States in 2016. Many patients with OUD have complex healthcare needs, contributing to their significant healthcare costs.

Excess costs for individuals with OUD and comorbid chronic medical conditions represent a significant value opportunity for potential reductions through targeted treatment strategies. Previous Milliman studies have found that most of the excess healthcare costs for patients with behavioral and chronic comorbidities result from increased medical treatment rather than directly from higher utilization of behavioral services. A new analysis by Milliman actuaries found a similar result for patients with OUD: over half of the excess costs for these comorbid patients were spent on physical healthcare services.

Although the OUD and long-term opioid user population make up only 1.5% of the total population, they account for over 80% of the total opioid spent among the commercially insured population in the U.S. The remaining 98.5% of the population accounts for only 20% of the prescription opioid expenditures.

Due to the complexity of health status for patients with OUD and elevated opioid use, there is no simple treatment solution that works for all patients. In this paper, Milliman’s Katie Matthews and Ally Weaver discuss in more detail items to be considered when it comes to OUD, including costs, utilization, and comorbidities.

Opioid prescription patterns affect risk scores

Opioid prescribing nationwide peaked in 2012 at over 80 prescriptions per 100 persons. Between 2012 and 2016, the prescribing rate decreased by almost 20%. Even after this decline, 19% of the U.S. population filled at least one opioid prescription during 2016.

As opioid prescribing declined, many doctors switched to other pain relief drugs. The change in prescribing patterns has potential implications for risk adjustment, because some of the drugs now being used for pain relief were previously flagged in pharmacy-based risk adjustment models as associated with high-cost conditions such as multiple sclerosis.

This brief by Christine Mytelka, Melanie Kuester, Colin Gray, and Lucas Everheart provides data on the decline in opioid prescribing and the increased use of other non-opioid pain relief drugs. Additionally, it addresses the corresponding effect that changing prescribing patterns may have on evaluating population health and risk-adjusted payments in risk-based managed care programs.

Hepatitis C treatments: Emerging trends

The high cost of therapy for patients with chronic hepatitis C (HCV) infection has been an important topic of discussion for key stakeholders in pharmacy benefit design and management. Multiple effective treatments have been introduced, with cure rates approaching 100%.

Although costly, curing HCV early on can prevent serious liver complications, such as hepatic cirrhosis, organ failure, and cancer, for the approximately 2.7 million affected people in the United States.

In 2016, there was a downward cost and utilization trend for the HCV Specialty category. Express Scripts reported in its 2016 Drug Trend Report that utilization of HCV therapies had decreased by 27.3% and the unit cost had decreased by 6.7%. The cost per member per year (PMPY) for HCV drugs decreased to $25.26 PMPY from $38.44 PMPY the previous year.

Why have cost and utilization suddenly decreased after two years of steady growth?

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Prescription drugs propel healthcare costs upward

Weltz-ScottUntil recently, prescription drugs have not materially altered the trajectory of the Milliman Medical Index (MMI). With drug costs being roughly 15.9% of the annual healthcare expense of our typical family of four, drug trends must be very different from other categories of care to materially influence overall healthcare cost trends. Nevertheless, they are doing just that. As discussed below, a combination of forces is creating the perfect pharmaceutical storm. Employers and families alike feel the financial consequences more than ever when a prescription is filled.

Specialty drugs
Specialty drug expenditures have grown over the past 25 years to the point where they now account for one of every three dollars spent on prescription drugs. While various definitions of specialty drugs are used in the industry, they nearly all have a common denominator: They are expensive. Medicare defines specialty drugs as those costing more than $600 per prescription. But the costs can be much higher than that. The category includes the well-publicized treatments for hepatitis C, some of which cost more than $1,000 per dose. Many subclasses of specialty drugs have huge potential to improve health outcomes, but also come at a significant cost. Experts project that the pipeline for specialty drugs is substantial and likely will not subside in the near future as manufacturers focus their efforts on targeted genetic profiles and rare disease states.

Compounded drugs
Compounded drugs have become one of the most costly components of pharmacy spending over the past several years. In fact, several recent national news stories have focused on this phenomenon. The U.S. Food and Drug Administration (FDA) defines compounding as “a practice in which a licensed pharmacist, a licensed physician, or, in the case of an outsourcing facility, a person under the supervision of a licensed pharmacist, combines, mixes, or alters ingredients of a drug to create a medication tailored to the needs of an individual patient.” Many of these drugs (often custom creams and ointments) have questionable clinical value, and compounding pharmacies are receiving much higher prices for compounds than the individual ingredients they comprise. As a result, drug trends have accelerated for compounded drugs, which is due in part to more limited regulation for them than for other drugs, along with increases in the average wholesale price (AWP) of these drugs. Pharmacy benefit managers (PBMs) have responded with specialized programs targeting the inappropriate use of this emerging drug class.

“Patent cliff” aftermath
Over the past few years, many brand-name drugs have lost patent protection, including some of the highest-grossing drugs in history such as Lipitor, Plavix, and Nexium. This “patent cliff” benefited consumers because generic versions became available at much lower costs. Now that many of the heavily utilized brand-name drugs have lost patent protection, the year-over-year price reductions produced by generic shifts have slowed as well. In addition, there is also evidence that generic price trends are on the rise, where in past years they have been flat or even negative. Manufacturer consolidation and reduced competition, particularly among generic manufacturers, may be a contributor to the increase in cost.

AWP increases
By some accounts, the cost of brand-name drugs is accelerating at a rate of over 10% annually, with generics increasing at a slower rate, but still higher than in the recent past. In large part, this has to do with the AWP increases themselves and with the fact that many payers’ contracts are tied to a discount off the AWP. Because most employer prescription drug contracts are based on discounts from the AWP, consumer prices are at the mercy of the manufacturer’s price increases.

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Do not overlook the value of claims auditing

When seeking ways to keep expenses under control, healthcare plan sponsors may overlook the value of claims auditing. Auditing fees may not be inconsequential, but the fact is that an accurate audit including both pharmacy and medical claims has the potential to pay back the investment many times over.

The more members a plan has enrolled and the more complex the plan’s benefit setup, the more likely a plan is to have a greater number of claims payment errors. Every plan will have claims paid in error. It is often tempting simply to assume claims have been paid with a certain degree of accuracy, and then move on without verifying whether the assumption is correct. Nevertheless, there will always be instances of duplicate billing, wrong or missing discounts and rebates, mistakes in member eligibility, incorrect plan setup, or other problems.

Regular audits of medical and pharmacy claims can find these discrepancies, leading to the recovery of overpayments. Even more importantly, audits can identify problems in the way a plan is set up and point the way to eradicating inaccuracies, reducing cost, and preventing waste in the future. Auditing can give plan sponsors vital information for revising and improving contracts with third-party administrators (TPAs) and pharmacy benefit managers (PBMs), which can lead to significant reductions in costs.

Many engagements begin with auditing one plan year, and then extend to multiple plan years based on the results of the first audit. Some plans have implemented processes that include monthly oversight reporting, which provides ongoing auditing and trend metrics. The monthly reporting is set up as an online service so that the reports can be automatically emailed to the health plans and accessed via an encrypted web portal.

Auditing is applicable to all types of healthcare plans, including self-insured plans, Medicaid, Medicare, Taft-Hartley funds, and commercial plans. In our opinion, any organization that is at risk for paying medical or pharmacy claims must consider the value of claims auditing.

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