If you ascribe to the generally accepted principles that most employees don't wish to become sick or injured and miss work, and most employers don't wish to use valuable resources providing workers compensate packages, it's hard to imagine why workers' compensation would be seen as anything other than a necessary workplace safeguard.
But talk about workers' compensation with pharmacy benefit managers (PBMs), the third party administrators of prescription drug programs, and their eyes instantly light up. That's because for PBMs, workers' compensation provides a great opportunity for increased profits without increased work.
In the shadowy world of pharmacy benefits management, exploiting workers' compensation reimbursement rates is one of the many ways PBMs ensure their own massive profits while ultimately driving up drug costs for employers and consumers. Workers' compensation reimbursement fees for prescription drugs are often set by state statute at rates between 10 and 40 percent more than a drug's average wholesale price. So when employers pay the PBM based on the reimbursement benchmark set by the state, the difference between what the drug costs and what the employer pays, often called "the spread," goes straight to the PBMs' bottom line.
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As one example, an insurer in North Carolina paid a PBM more than $1,400 dollars for medications under worker's compensation while the PBM reimbursed the pharmacy only $900. The "spread" of $500 dollars goes to PBM.
Benefits managers who work consistently with PBMs know that negotiating fair, transparent contracts can be tricky. PBMs have a knack for inserting ambiguous language into contracts that makes employers believe they're getting a good deal on drug pricing when in fact they're overpaying for medications.
"Spread pricing" is also a huge problem outside just the realm of worker's compensation. PBMs are notorious for forcing pharmacists to sign contracts which forbid them from revealing to the PBMs' clients how much the pharmacy receives from the PBM for a given drug. That secrecy gives the PBM room to mark-up the cost of the medication and overbill the employer while keeping the profits.
In the case of worker's compensation, state statutes are often complicit in driving up costs and inflating PBM profits. As state legislatures face increasingly tight budgets, they can eliminate waste and save money by modifying reimbursement benchmarks.
There's good reason why employers compensate employees who have been injured on the job. But there's no good reason that by doing so employers also feed massive profits to PBMs who do little to deserve the revenue.
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