Controlling Costly Behavior is Really Hard

How hard is it to control costly behavior?

Really hard.

The California Workers’ Compensation Institute (CWCI) says that, despite landmark legislation in 2011 meant to trim the costs of compound drugs, the average amount paid for a compound prescription has jumped 68.2%.

And even though utilization of compound drugs decreased 35.4% following the passage of AB 378, a measure that required compound drugs be billed by ingredient and paid using the Medi-Cal rate for each ingredient as identified by its national drug code, because of the higher prices (increasing to $774.21 during the first six months of 2012 from $460.42 during the first half of 2011), the amount of total drug spending for compound drugs increased to 12.6% of all workers' compensation prescription payments in 2012 from 11.6% in 2011.

This, despite CWCI's finding that compounds accounted for 3.1% of workers’ compensation prescriptions in 2011 and fell to 2% of prescriptions.

According to CWCI, the increase in costs is because of an increase in the number of ingredients and the average cost of these ingredients.

The average number of ingredients per compound increased 13.1% to 3.8 in 2012 from 3.4 in 2011. The average amount paid per ingredient increased 48.7% to $201.67 from $135.63.

CWCI says that the biggest contributor to new ingredients found in compound drugs is dextromethorephan powder.

Dextromethorephan is a synthetic morphine derivative that is typically used as a cough suppressant but can also be used for neuropathic pain management.

Cough and cold medications increased 14-fold as a percent of compound ingredients from 2011 to 2012, with a corresponding 22-fold increase in the percent of payments for compound drugs, CWCI found.

“Without increased federal oversight of drug compounding, and/or mandatory independent clinical trials to confirm the safety and efficacy of compounded drugs, these findings suggest that unit price controls alone, without stricter utilization controls such as Medicare's ban on non-FDA-approved medications or the adoption of a pharmaceutical formulary, are not enough to contain the growth of compounded drug costs in workers' compensation,” CWCI said in a statement.

I know there's a place in pharmaceutical treatments for compound drugs though I admit I'm ignorant of how the pharmaceutical practice is implemented. I'm sure that conscientious pharmacists fill prescriptions in accordance with physician requests.

I'm also quite sure that there are some who found the constrictions of SB 378 too intrusive on the profit margin of the business.

Yesterday I "attended" a free educational webinar hosted by WorkCompCentral, Drug Abuse Trends with Prescribed Medications, presented by Dr. Joel Mata. The statistics that Dr. Mata presented were truly eye-opening, such as the fact that the United States consumes over 90% of all of the world's oxycodone (and actually, I think the number was even higher - more like 99% - but my 53 year old memory at 4 a.m. isn't completely functional).

There are drivers behind pharmaceutical issues in workers' compensation, and general health, that go way beyond physicians, patients and pharmacists.

Drugs are immensely profitable. Illegal, legal, street-based, prescribed, sold, re-sold, stolen, imported ... it doesn't matter what the path to distribution is. The drug market is nearly boundless - as boundless as human imagination and desire.

And the money that flows from that market has very high operational margins - in other words in the long run the cost of inventing, producing and distributing drugs is relatively cheap.

Which is why there is so much money available for marketing drugs. You've seen the commercials on TV and all over the Internet - glowing testimonials on the efficacy of a particular drug followed by lengthy disclaimers regarding side effects. Those spots aren't cheap, and I'm sure help to raise awareness of brand drugs.

Pharmaceutical company sales persons hit the road every day to visit physicians to encourage prescriptions.

Other companies provide pharmaceutical distribution services to physicians, taking care of pricing, billing, fulfillment, etc. with promises of additional profit lines for physician practices.

The point with these examples is that the profit in drugs is so high that despite all of the money spent marketing drugs, there is still plenty of willing purchasers, legally or illegally.

I don't have a solution. I don't think anyone really does.

CWCI makes some recommendations about compound drugs, such as instituting a ban on the use of ingredients that haven’t been approved by the U.S. Food and Drug Administration or adopting a pharmaceutical formulary, but how efficacious will those really be?

Blogger, critic, consultant and friend, Joe Paduda, says that the moral of the study is that "unscrupulous providers will quickly figure out how to game regulations/controls that are not well-developed and carefully considered."

That will always be the case. And I don't think it is limited to "regulations/controls that are not well-developed and carefully considered." I think even well-developed, carefully considered laws are just as likely to be gamed as not.