Unregulated drugs produced by controversial compounding pharmacies are costing Connecticut taxpayers up to $24 million this year in prescription payments on behalf of state employees and retirees, a stunning 3,000 percent increase from their $800,000 price just three years ago.
It’s a symptom of a national explosion in concoctions that combine drugs for uses — mostly as topical creams for pain or other conditions — that have not been approved by the U.S. Food and Drug Administration.
For example, the compounding pharmacies often use a medication approved by the FDA for oral use as a component of a cream to rub on the skin, even though it hasn’t been tested as effective or safe for that use.
A 30-day supply of one such medication can cost $10,000, according to state Comptroller Kevin Lembo, who is in charge of administering the health insurance program for state employees and retirees.
In an April 7 memo to a state cost-containment committee, Lembo wrote that concerns about the safety, effectiveness and ballooning costs of the compound medications, mostly produced and aggressively marketed by out-of-state companies, have prompted him to impose a new “prior authorization” requirement, starting in a few weeks.
Under his plan, a prescribing doctor would have to demonstrate “medical necessity” for compounded medications before payment is approved by CVS Caremark, the state’s health benefit manager. Any denial could be appealed by the patient.
“I am convinced that there are bad actors in this drama, up to and including those who would peddle snake oil on our members,” Lembo said Friday when asked about his memo to the state’s Health Care Cost Containment Committee.
He said his intent is to protect the health of those covered under the plan so that “everybody’s rights are protected, and we’re not just blindly throwing money out the door at a time when we can least afford to do so.”
The new “medical necessity” standards could save taxpayers nearly all of this year’s estimated $24 million taxpayer cost, said Lembo, who previously served as the state’s healthcare advocate.
The start date for the new standards now is set for May 15, he said. Lembo said that he has authority to “make determinations regarding eligibility for coverage, payment of claims and provision of benefits,” and thus can implement the prior-authorization plan on his own.
But it appears that he’ll have to fight to get his way. State employee union leaders plan to file a formal grievance to challenge the new policy.
“We share the comptroller’s concern about the safety, efficacy and cost” of the compound drugs, said Dan Livingston, an attorney who serves as chief negotiator for the State Employees Bargaining Agent Coalition, or SEBAC. But he said Lembo’s plan creates “too much interference in medical choices between a doctor and patient” in individual cases where such medications have already been prescribed.
Labor Vs. Management
Livingston is a member of the state health cost containment panel to which Lembo outlined his new prior-authorization plan. The panel has both labor and management representatives. The labor side “suggested a compromise,” Livingston said, but management representatives didn’t agree.
“So it will be decided by a neutral arbitrator,” he said. That’s Roberta Golick, who is designated to arbitrate disputes between labor and management under SEBAC’s collective bargaining agreement with the state.
Livingston said the state employee unions can live with Lembo’s new rules going forward, but not as they apply to employees and retirees who already have been receiving coverage for prescriptions for compound medicines. That group of people, whose prescriptions Lembo said are costing $24 million this year, should not be subject to having CVS Caremark block payments for prescription renewals, he said.
He said the unions’ counter-proposal to Lembo’s idea was this: In cases of people who have already been receiving coverage for compounded medicines, the prescribing doctor would be required both to certify that it’s medically necessary and to notify the patient that the compounded medication hasn’t been tested by the FDA and approved as effective and safe.
CVS Caremark wouldn’t have the power to refuse payment in these pre-existing cases, Livingston said, thus removing the “interference” the unions objected to. But he said the benefit of the proposal is that it could lead the doctor to recommend a different medication to the patient that’s FDA-approved, or for the patient to request a different prescription.
He said a doctor might tell a patient in such a case, “I was giving you this cream, but I’ve since learned that it has not been approved for this purpose,” and that might lead to them to agree to discontinue using the compound medicine. That’s preferable “to some insurance carrier saying, ‘You can’t have this any more,'” Livingston said, because the latter would raise a question of whether the decision against a compound medicine was “based on medical judgment or driven by cost.”
The overall effect of the union’s proposal probably would be to reduce the usage of such medications and, along with it, the cost to the state, Livingston said, but “if this turns out to be wrong … we’ll take another look at it.”
Whatever the arbitrator makes on the upcoming grievance, “We’ll live with the decision,” Livingston said.
Under Lembo’s proposal, prior authorization rules would apply to both new prescriptions and renewals involving compound medicines, which means that the existing $24 million in annual payments for existing prescriptions would undergo new scrutiny to see if they should continue.
CVS Caremark would approve or deny state payments on prescriptions after reviewing the doctors’ submissions. An employee or retiree could appeal a denial under an existing “external independent review” procedure that’s conducted by the state Department of Insurance. If that review favors the patient, “we pay it,” Lembo said.
Lembo said that his approach “will ensure that patients have unlimited access to traditional compound medications” whose efficacy and safety have been accepted for years, such as an approved prescription drug that’s supposed to be administered as a pill, but is mixed by a pharmacist with something else to make it easier for a baby to take in liquid form.
But the new the prior-authorization process is aimed at the rash of new compounded medications, and is “expected to curb the increasingly widespread practice of prescribing costly, multiple-ingredient topical creams of untested safety and effectiveness,” Lembo added.
Investigation Requested
Lembo last month asked state Attorney General George Jepsen’s office to start looking into whether there’s “any possible violation of state and/or federal law associated with the sharp increase in the production and prescribing of compound drugs and the associated financial and safety concerns.” On Friday, he said one aspect of that would be possible improper relationships between people in the compound medication business and doctors.
He said in the letter that the large-scale pharmacies aren’t subject to the same standards as pharmaceutical companies.
“Drug manufacturers must comply with strict safety and legal requirements and must prove the safety and efficacy of their products through large scale clinical trials,” he wrote. “Compound pharmacies are generally exempt from such requirements under law. … In addition, many compound pharmacies are actively advertising and directly marketing multiple ingredient proprietary compounds to doctors and actively soliciting prescriptions.”
“Furthermore, most of the new costs to the state plan are associated with prescriptions filled by out-of-state compound pharmacies,” with 91 percent of claims for compounds coming from outside Connecticut in the 2014 fiscal year, Lembo wrote. “That … year the cost per script was significantly higher for out-of-state pharmacies at $604 compared to $61 in-state. … Scripts from out-of-state pharmacies are concentrated in southern states with the most coming from compound pharmacies in Florida, Mississippi, and Missouri.”
The top compounding pharmacy received $2.2 million through the state’s health plan for 237 prescriptions from October 2013 to September 2014.
Under state employees’ and retirees’ health coverage, prescription copayments for a 30-day supply of medicine range from $5 to a maximum of $35. That top copayment of $35 is for a “non-preferred brand-name drug” that hasn’t been certified as medically necessary by a doctor; it drops to $20 with such a physician’s certification.
Jon Lender is a reporter on The Courant’s investigative desk, with a focus on government and politics. Contact him at jlender@courant.com, 860-241-6524, or c/o The Hartford Courant, 285 Broad St., Hartford, CT 06115 and find him on Twitter@jonlender.
