The Department of Labor’s Office of Workers’ Compensation Programs (OWCP) provides workers’ compensation coverage to approximately 2.6 million federal and postal workers through the Federal Employees’ Compensation Act (FECA) program.
Back In Fiscal Year (FY) 2015 and FY 2016, a sharp increase in pharmaceutical spending for the FECA program raised concerns. Subsequent Office of Inspector General work found OWCP had not done enough to ensure it paid the best prices for prescription drugs, specifically noting the lack of a pharmacy benefit manager to help contain costs and the failure to determine if alternative prescription drug pricing methodologies would be more competitive.
In response, OWCP said it took a number of actions to reduce pharmaceutical spending, including implementing controls on prescriptions for compounded drugs and for opioids. According to data provided by OWCP, it significantly decreased total compounded drug spending from almost $256 million in FY 2016 to less than $176,000 in FY 2020 and reduced opioid spending from over $86 million in FY 2016 to approximately $29 million in FY 2020.5
However, the Office of Inspector General remained concerned about OWCP’s ability to effectively manage the cost, as well as the use, of pharmaceuticals in the FECA program.
Given these concerns, U.S. Office of Inspector General recently contracted with the independent certified public accounting firm of Harper, Rains, Knight & Company, P.A. (HRK) to conduct an audit to determine if OWCP had indeed effectively managed pharmaceutical spending in the FECA program since the 2015-2016 audit.
To answer this question, HRK’s audit included: analyzing 6 years of pharmaceutical data covering Fiscal Year 2015 through Fiscal Year 2020; interviewing OWCP management; reviewing OWCP policies, procedures, and other documentation; and comparing the FECA program to industry best practices and other workers’ compensation programs.
The March 2023 Office of Inspector General audit report found that OWCP did not effectively manage pharmaceutical spending in the FECA program from Fiscal Year 2015 through Fiscal Year 2020. Specifically, OWCP did not pay the best available prices for prescription drugs. HRK identified up to $321.26 million in excess spending during the audit period.
In addition, OWCP did not effectively monitor pharmaceutical policy changes to ensure implementation, resulting in claimants receiving thousands of inappropriate prescriptions and potentially lethal drugs, including 1,330 prescriptions for fast-acting fentanyl after issuing a policy that restricted its use.
HRK also found OWCP failed to timely identify and address emerging issues and did not perform sufficient oversight of prescription drugs that are highly scrutinized and rarely covered in workers’ compensation programs. As a result, OWCP spent hundreds of millions of dollars on drugs that may not have been necessary or appropriate for FECA claimants.
Finally, HRK found OWCP lacked sufficient clinical expertise and guidelines to ensure appropriate pharmaceutical decisions, which could negatively impact claimants’ health, recovery, and return to work.
Remarkably the current audit noted that “Health Affairs, a peer-reviewed journal of health policy that has been cited by government officials and national media, reported that prescription drug rebates can sometimes reach 50 percent or more of list price and total Medicare Part D drug spending offset by rebates on brand name drugs in 2018 was 25 percent.”
“Even though incorporating rebates can result in substantial savings, OWCP indicated it did not incorporate prescription drug manufacturer rebates in the FECA pharmaceutical program. According to OWCP officials, the FECA program never had a mechanism, or a contract, to incorporate rebates for pharmacy expenditures during the audit period.”
On the topic of appropriate prescriptions, the new audit continued to say that “OWCP issued significant policy and process changes related to claimant prescriptions prior to and during the audit period. Although these changes were intended to improve claimant safety and save costs, OWCP did not ensure the changes were properly implemented.”
“This occurred because OWCP did not effectively monitor its bill pay vendor, who was responsible for implementing these changes. As a result, OWCP allowed claimants to receive thousands of inappropriate prescriptions and potentially lethal drugs, which could have caused serious harm to claimants.”
“For example, OWCP paid for more than 98 percent (1,330 of 1,348) of prescriptions for fast-acting fentanyl, a potentially lethal and extremely addictive drug, without evidence of required cancer diagnoses.”
HRK made 10 recommendations to OWCP to strengthen management of pharmaceuticals in the FECA program, specifically regarding: evaluating alternate pricing methodologies, ensuring implementation of and adherence to policies, identifying emerging issues by developing and implementing an ongoing pharmaceutical monitoring program, ensuring sufficient clinical expertise among FECA staff, and using evidence-based clinical guidelines to inform prescription drug coverage policies.
OWCP generally agreed with the latest recommendations.