Worker's Compensation Advisory Council Meeting Minutes

Madison, Wisconsin

March 10, 2015

Members present: Mr. Beiriger, Ms. Bloomingdale, Mr. Buchen, Mr. Ginsburg, Ms. Johnson, Mr. Kent, Mr. Metcalf, Mr. Redman, Mr. Schwanda, Ms. Seiler, and Ms. Thomas

Staff present: Mr. Aiello, Ms. Arnold, Mr. Ezalarab, Mr. Krueger, Mr. Moreth and Mr. O'Malley

Excused: Mr. Brand and Ms. Nugent

Call to Order/Introductions: Mr. Metcalf convened the Worker's Compensation Advisory Council (WCAC) meeting at approximately 10:00 a.m. in accordance with Wisconsin's open meetings law. WCAC members, staff and members of the audience introduced themselves.
Approval of minutes: Mr. Kent moved to approve the minutes of the February 10. 2015 meeting. Mr Berriger seconded the motion. The minutes were unanimously approved without correction.
David Anderson, DWD Assistant Deputy Secretary: Mr. Anderson has served as the Department of Workforce Development (DWD) Assistant Deputy Secretary for over one (1) year. He appeared at the meeting to respond to questions concerning the resolution approved by the Council at the last meeting.

Mr. Anderson stated that DWD has been in preliminary meetings with the Office of the Commissioner of Insurance (OCI) and the Division of Hearings and Appeals (DHA), about the proposed transfer of the Worker's Compensation Division (WCD) with a focus on the budget language. He stressed that DWD Secretary Newson has been given assurances by OCI that the quality and effectiveness of the WC program will be maintained with the transfer of the program, if the budget bill is passed and signed into law. In addition, Mr. Anderson said it was premature to discuss what the transfer will involve since the legislation has not yet been passed.

Ms. Bloomingdale inquired about whether there will be careful planning for the proposed transition. Mr. Anderson stated a good foundation has been laid for the transition, and that it will be robust, and as smooth and effective as possible.

The members asked Mr. Anderson about the language used in the Budget Bill related to the proposed transfer and the need for the current high level of services to be maintained for stakeholders, including business and workers. Mr. Anderson agreed and stated this is why the transition process is important.

There was also a discussion about the effect on the hearing process when the administrative law judges are transferred to DHA. The DHA tends to separate its ALJs into different units, based on an area of specialty. BJ Dernbach, DWD Legislative Liasion, will look into other states where the administration of the worker's compensation program is located in more than one (1) agency, and study the effectiveness of these states. Mr. Anderson emphasized that DWD Secretary Newson gives his assurance that the quality and effectiveness of the Wisconsin worker's compensation program will not change with the proposed transfer. Mr Kent commented on drafting issues in the Budget Bill. Mr. Buchen stated there was no intention to make substantial changes to the statute in the Budget Bill. Mr. Kent stated that it is important to make sure that the employer, employee and insurer sides will be protected.

Correspondence: Mr. O'Malley reviewed a February 10, 2015, letter from Tracey Schwalbe, General Counsel, Labor and Industry Review Commission, concerning the following proposed statutory changes: 1. Amend s.102.23 (1), Wis. Stats., to require the "adverse parties" to a court appeal be correctly named so that all necessary parties are included in the appeal; 2. Amend s. 102.18 (3), Wis. Stats., to clearly define the standard of review "reason beyond control" for late appeals of ALJ orders to LIRC; and 3, Amend s. 102.18 (4), Wis. Stats., to clarify that appeals to circuit court from LIRC orders run from the date of LIRC's decision. A fourth proposal to require appeals from ALJ orders to only be filed with LIRC has been withdrawn.
Drug Pricing: Mr. Trygve Anderson, R. Ph., Clinical Executive, Elsevier, gave a presentation about drug pricing accompanied by a PowerPoint entitled Taking the Mystery Out of Drug Pricing. Drug pricing is a complex and dynamic issue. Elsevier is a compendia with commercial workers' compensation experience in Florida.

Wholesale acquisition cost (WAC) is the cost of the sale from the drug manufacturing company to the wholesaler. Drug manufacturers do not do much distribution. The cost of the sale of drugs from wholesalers to the pharmacies is the average wholesale price (AWP). The AWP is similar to the MSRP for automobile sales. AWP was the staple in drug reimbursement agreements for over 40 years, except for multi-source drugs. In 2009 there were lawsuits that resulted in using other means to determine drug prices other than AWP and Hearst ceasing to publish the Blue Book. This has resulted in development of the acquisition model and use of the acquisition cost. Dispensing fees are for the professional judgment of pharmacists in dispensing drugs. Dispensing fees are usually in the $1.00 to $3.00 range.

In the past pharmaceutical manufacturing companies send out information on wholesale prices one-two times per year and usually in early July. Now new drug pricing information is sent out throughout the year including July.

Elsevier is a drug pricing leader where the public can view prices. Pricing benchmarks include AWP, state MAC pricing, federal upper limit (FUL), PAC, WAC and National Available Prescription Drug Program (NADAC) that is used by CMS. Elsevier's competitors are Medispan and First Data Bank. Drug prices go out by e-mail and are available the same day the drug companies release the information. Prices are reported from all manufacturers and the receipt of price data simultaneous with other drug compendia for each capsule, per pill or billing unit. Updates can occur during weekends and holidays. There are rebates and negotiated payments in the pharmacy distribution system.

Elsevier developed predictive acquisition cost (PAC) for determining the costs of drugs. The analytics model reviews industry MAC benchmarks, published price lists, existing pricing benchmarks, behavioral metrics, supply/demand measures and survey-based acquisition costs. PAC estimates the drug acquisition cost for a typical independent pharmacy in a transparent and defensible way. PAC is more closely aligned with true drug acquisition cost than any other available drug price benchmark.

The challenges associated with setting appropriate drug reimbursement pricing include lack of transparency into acquisition cost, movement of price in generics, many drugs to monitor and difficult to contain outliers. About 84% of all drugs that are used are generic while accounting for about 20% of the total cost for drugs. There is a generic drug "cliff" coming because most products have already come to market and there will be fewer generic drugs entering the generic status in the future.

Mr. Anderson stated that the PAC is better to use for determining drug costs because an elevated drug price benchmark increases reimbursement rates and costs for payers. A reduced drug price benchmark decreases profits for PBMs and retail pharmacies. The only way to accurately monitor and equitably set drug reimbursements and prices is with insight to true acquisition costs. Increasing demand for transparency requires a better solution. Some companies do not provide prices on some types of drugs. Although AWP continues to be commonly used, it is not a true representation of market prices for either generic or name brand drugs. Survey based pricing can only determine acquisition cost for the drugs that appear on the invoices surveyed. Elsevier does not use data from other countries in its analytics model. He noted that Walgreens, CVS, and Rite Aid are the three largest retail pharmacy companies in the country.

Initial pricing adjustments create a better balance for reimbursements for drugs. As an example, Mr. Anderson cited a worker's compensation provider in Tampa, Florida raised the price of 148 drugs, reduced the price for 482 and 272 remained unchanged. The number of network complaints decreased for 120 to 25, 75% reduction.

Mr. O'Malley inquired about whether Elsevier can establish accurate pricing for repackaged and compounded drugs. Mr. Anderson stated that prices for repackaged drugs are available but not for compounded drugs.

Mr. Kent inquired about pricing for experimental drugs. Mr. Anderson responded there are three (3) types of experimental drugs. Investigational new drugs are specialty drugs for rare conditions, have not gone through trials and are not approved by the FDA. Bio-similar drugs are new drugs that will be allowed by the FDA with an Orange Book rating. Orphan drugs are required to be made by law for one in 10,000 or one in 100,000 who get certain diseases.

Administrative Rules: Mr. O'Malley advised the members that the proposed amendments to DWD 80 of the Wisconsin Administrative Code covering the audio recording of hearings, and other housekeeping/ procedural changes, are now going forward. A public hearing on the proposed rules is tentatively scheduled on April 28, 2015.
Labor and Industry Review Commission (LIRC): Commissioner David Falstad gave a presentation to the Council on the role and responsibilities of the Labor and Industry Review Commission (LIRC). LIRC is comprised of three (3) commissioners: Laurie McCallum, Chair, Bill Jordahl, and Mr. Falstad. Mr. Falstad introduced Maria Gonzalez Knavel who was recently appointed by the governor as general counsel to LIRC; and Jeff Shampo, a senior LIRC attorney. The former general counsel, Tracey Schwalbe, was named deputy general counsel. Commissioner Falstad gave a broad overview of LIRC's mission to provide a fair and impartial review of the decisions of the administrative law judges in three programs, Unemployment Insurance, Worker's Compensation, and Equal Rights. Mr. Shampo answered questions. Commissioner Falstad especially wanted to thank the Council for making the changes in the agreed upon bill that were requested by LIRC.
Other Council Business: There was no other council business.
Adjournment: Mr. Beiriger moved to go into closed caucus, and to subsequently adjourn from caucus. Ms. Bloomingdale seconded the motion. The motion was approved unanimously and the members of the Council went to their separate caucuses at 11:15 a.m.

All members of the Council will not be available on April 14, 2015, the date of the next scheduled meeting. April 27, 2015 and May 28, 2015 were set as future meeting dates, when the members would be available. These two meeting dates are in lieu of the previously scheduled meeting dates of April 14th and May 12th. At approximately 1:45 p.m., the meeting was adjourned.