Texas Department of Insurance Division of Workers’ Compensation

1. Texas Department of InsuranceDivision of Workers’ Compensation Pharmacy Reimbursement Stakeholder Meeting February 2, 2010

2. Agenda • Introductions • Overview and Background of Pharmaceutical Benefits • Review and Discussion of Current 28 TAC §134.503 (regarding Reimbursement Methodology) • Benchmark Options for Reimbursement Methodology • Stakeholder Recommendations for a Payment Level or a Payment Range • Next Steps

3. Current Statutory Reference §408.028. PHARMACEUTICAL SERVICES. (f) Notwithstanding any other provision of this title, the commissioner by rule shall adopt a fee schedule for pharmacy and pharmaceutical services that will: (1) provide reimbursement rates that are fair and reasonable; (2) assure adequate access to medications and services for injured workers; and (3) minimize costs to employees and insurance carriers. (g) Insurance carriers must reimburse for pharmacy benefits and services using the fee schedule as developed by this section or at rates negotiated by contract.

4. Current Statutory Reference §413.011. REIMBURSEMENT POLICIES AND GUIDELINES; TREATMENT GUIDELINES AND PROTOCOLS. (d) Fee guidelines must be fair and reasonable and designed to ensure the quality of medical care and to achieve effective medical cost control. The guidelines may not provide for payment of a fee in excess of the fee charged for similar treatment of an injured individual of an equivalent standard of living and paid by that individual or by someone acting on that individual's behalf. The commissioner shall consider the increased security of payment afforded by this subtitle in establishing the fee guidelines.

5. Current Pharmaceutical Rules • § 134.500 Definitions • § 134.501 Initial Pharmaceutical Coverage • § 134.502 Pharmaceutical Services • § 134.503 Reimbursement Methodology • § 134.504 Pharmaceutical Expenses Incurred by the Injured Employee • § 134.506 Outpatient Drug Formulary

6. Reimbursement Methodology • Initially adopted in the 1991 Medical Fee Guideline • Readopted in the 1996 Medical Fee Guideline • §134.503 Reimbursement Methodology • adopted as a stand alone rule effective January of 2002 • revised effective March 2004

7. Texas Workers’ Compensation SystemPharmacy Reimbursement Rates

8. Pharmacy Reimbursement Estimate Estimated Pharmaceutical Reimbursement by Class, CY 2007 Total Payments -$135,039,150

9. Average Discount Off AWP Source: 2009-2010 Prescription Drug Benefit Cost and Plan Design Report, Pharmacy Benefit Management Institute, LP

10. Trends in Retail Brand Reimbursement Source: 2009-2010 Prescription Drug Benefit Cost and Plan Design Report, Pharmacy Benefit Management Institute, LP

11. Average Dispensing Fee Source: 2009-2010 Prescription Drug Benefit Cost and Plan Design Report, Pharmacy Benefit Management Institute, LP

12. Trends in Retail Brand Reimbursement Source: 2009-2010 Prescription Drug Benefit Cost and Plan Design Report, Pharmacy Benefit Management Institute, LP

13. Trends in Price InflationBrands vs. Generic Drugs

14. Common Pricing Benchmarks • AWP – Average Wholesale Price • ASP – Average Sales Price • AMP – Average Manufacturer Price • Best Price • WAC – Wholesale Acquisition Cost • MAC – Maximum Allowable Cost • FUL – Federal Upper Limit

15. Benchmark Comparison to AWP

16. Stakeholder Discussion • Stakeholder Comments • Benchmarks • Payment Level • Payment Range • Other Considerations

17. Next Steps • Additional research • Informal working draft rules • Proposal • Public Comment • Adoption • Implementation

18. Additional Resources • Prescription Drug Pricing in the Private Sector (http://www.cbo.gov/ftpdocs/77xx/doc7715/01-03-PrescriptionDrug.pdf) • 2009-2010 Prescription Drug Benefit Cost and Plan Design Report (www.pbmi.com/BenefitDesign.asp) • AMCP Guide to Pharmaceutical Payment Methods, 2009 Update (Version 2.0) (www.amcp.org/data/jmcp/1002.pdf) • Narcotics in Workers Compensation(www.ncci.com/nccimain/IndustryInformation/ResearchOutlook/Pages/Narcotics_in_WC.aspx)