Health Care Current: October 22, 2013

The challenge of drug diversion

This weekly series explores breaking news and developments in the U.S. health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory and legislative changes.

Overprescribed: health care and the challenge of drug diversion

I know from personal experience how easy it can be to obtain prescriptions for very powerful and addictive controlled substances. When my son broke his back, we faced the chilling realization that he had been prescribed pain medications by the three health care providers who he interacted with during treatment, follow-up and therapy. He was 16-years-old at the time and was given continuous access to the same prescription drugs that cause so many to fall into a cycle of abuse and addiction. And, without coordination between these three entities responsible for his care, it slipped through the cracks. We were lucky. As informed consumers of the health care system, we identified the issue and this episode didn’t result in a more serious one—but this is the type of challenge which many are not prepared to manage.

Prescription drug diversion (i.e. the use of prescription drugs for recreational or non-medical purposes) is often thought of as a shadowy street crime that is committed by felons and occurs only in major urban areas. It is often thought of as a crime that federal or state law enforcement agencies investigate and a crime for which people frequently go to jail. In reality, individuals who suffer with prescription drug addiction or misuse are not numbers or nameless strangers living in big cities―they are our children, spouses, parents, friends, veterans and neighbors.

But, this is only part of the story. This type of abuse has become not only a public health problem, but an epidemic that was responsible for 88 deaths per day in 20101 ―more than heroin and cocaine combined. It is an issue that often starts with the legitimate and medically appropriate use of a prescription drug that is highly addictive. But it can lead to the theft of prescription pads, doctor shopping, illicit purchases on the street, or in some cases, even armed theft of retail pharmacies.

The increasing incidence of drug diversion crimes places significant burden on the health care system. Researchers have found that deaths involving prescription pills have doubled in 29 states and quadrupled in four states between 1999 and 2010. About 6.1 million people in the U.S. currently abuse prescription pills and annual deaths due to an overdose of controlled substances now exceed vehicle-related deaths:2

Drug overdose mortality rates (per 100,000)

Source: Trust for America’s Health, “Prescription Drug Abuse: Strategies to Stop the Epidemic,” 2013

There are significant economic costs as well. In a 2007 study, the Coalition Against Insurance Fraud, an alliance of consumer groups, insurance companies and government agencies, estimated the cost to insurers of prescription painkiller abuse to be as much as $72.5 billion. Other reports show abuse of these drugs has risen in the years since.

The public health and economic costs of drug diversion have elicited increased attention from enforcement agencies at the federal, state and local levels. For example:

  • The U.S. Department of Justice and Drug Enforcement Administration have increased the number of investigators and prosecutors that focus on prescription drug diversion; between fiscal year (FY) 2008 and FY2011, regulatory inspections increased from 708 to 4,448 (a 528 percent increase) and administrative actions, including Orders To Show Cause and Immediate Suspension Orders, increased from 70 to 131 (a 87 percent increase).
  • Law enforcement agencies are sending in undercover agents into the offices of health care providers who are suspected of prescribing “abusable” drugs in the absence of medical necessity.
  • In September 2013, U.S. Food and Drug Administration (FDA) released new requirements for manufacturers of prescription pain medications that are designed to combat misuse, addiction, abuse and overdosing of extended-release and long-acting opioid analgesics. New labels will address accidental exposure, interaction with alcohol, neonatal opioid withdrawal syndrome and respiratory depression.4
  • At least 49 states have passed legislation to enable prescription drug monitoring programs (PDMPs) to help prescribers and pharmacies track who is writing and filling prescriptions for controlled substances.5
  • Manufacturers and distributors are using new data analytics tools to conduct suspicious order monitoring in which they track orders by retail pharmacies to see if they are ordering more of the highly abused drugs than expected or normal.

The need for heightened scrutiny across the supply chain is expected to increase for all players: pharmaceutical manufacturers, prescription benefit managers, drug distributorships, national pharmacy chains and hospital systems will likely need to demonstrate their compliance programs are being proactive in assessing their risks.

My family’s experience of being overprescribed these “abusable” drugs served as a wake-up call for us. We can be hopeful that, as health care reform takes its place on the main stage, new models of paying for outcomes and care coordination and the use of big data and analytics may help to identify solutions to the challenges faced in the U.S. around prescription drug abuse, so that others will not face similar situations.

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1 Office of National Drug Control Policy, “Announcing the Opioid Overdose Toolkit,” August 28, 2013,
2 Trust for America’s Health, “Prescription Drug Abuse: Strategies to Stop the Epidemic,” October 2013
3 Department of Justice, “Statement of Joseph T. Rannazzisi, Deputy Assistant Administrator, Drug Enforcement Administration, before the Caucus of International Narcotics Control United States Senate,” July 18 2012,
4 U.S. Food and Drug Administration, “FDA announces safety labeling changes and postmarket study requirements for extended-release and long-acting opioid analgesics,” September 20, 2013,
5 Robert Wood Johnson Foundation “Prescription Drug Abuse: Strategies to top the Epidemic 2013,” October 7, 2013,

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My Take

By Jeremy Perisho, Partner, Deloitte Financial Advisory Services LLP



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Implementation & Adoption

Over 5 million people remain uninsured in states not expanding Medicaid

According to analysis completed by the Kaiser Family Foundation (KFF), an estimated 5.2 million individuals will fall in the health insurance “coverage gap” as a result of states choosing not to expand their Medicaid programs under the Affordable Care Act (ACA). Those in the coverage gap earn too much to qualify for Medicaid, but not enough to qualify for federal subsidies to assist them in buying insurance on the health insurance exchanges (HIXs). Out of the 26 states currently opting out of the Medicaid expansion in 2014, five states account for 55 percent of the people who will find themselves in the coverage gap:

  • Texas – 20 percent
  • Florida – 15 percent
  • Georgia – 8 percent
  • North Carolina – 6 percent
  • Ohio – 6 percent

Beginning January 1, 2014, the median Medicaid eligibility threshold for a family of three in the states that are not expanding their Medicaid program will be 47 percent of the federal poverty level (FPL)— an income of roughly $9,400 per year. The 24 states and the District of Columbia (D.C.) that have or will expand their Medicaid programs will have a Medicaid eligibility level of 138 percent of the FPL—roughly $27,000 for a family of three. The report estimates that the majority of those in the coverage gap will remain uninsured because of their limited options.

(Source: Kaiser Family Foundation, “The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid”, October 2013)

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Prescriptions for Medicare patients differ by area of residence

A recent study from researchers at The Dartmouth Institute for Health Policy and Clinical Practice found that there are significant geographic differences in the type and number of prescriptions written for and filled by Medicare patients based on their area of residence. The analysis separated the country into 306 regional markets and examined variations in the quantity and quality of prescription drug use, spending and use of brand name drugs across those markets. Highlights from the study include:

  • Regions with higher Medicare Part D spending on medications were not consistently using the most effective medications; these regions spent significantly more than the national average for prescription spending of $2,670 per beneficiary
  • The average Medicare Part D patient filed 49 standardized 30-day prescriptions in 2010; ranging from a high of 63 prescriptions per patient in Miami, Florida compared to a low of 39 prescriptions per patient in Grand Junction, Colorado
  • Most (72 percent) Medicare heart attack survivors filled a statin prescription after leaving the hospital but use ranged from a high of 91 percent in Ogden, Utah, to a low of 44 percent in Abilene, Texas
  • One in four Medicare Part D beneficiaries filled a prescription identified as high-risk for patients over age 65
  • Beneficiaries in New York City were more than twice as likely to fill brand name prescription drugs as those in La Crosse, Wisconsin (36 percent vs. 16 percent)

(Source: The Dartmouth Institute for Health Policy and Clinical Practice, “The Dartmouth Atlas of Medicare Prescription Drug Use”, October 2013)

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Medicare expenditures and utilization to decrease under ACA

As a result of lower net reimbursement for inpatient services, the ACA will likely reduce inpatient hospital utilization for Medicare beneficiaries, thus reducing Medicare expenditures by $379 billion from 2012 to 2021 according to a study published in this month’s issue of Health Affairs. Researchers analyzed the relationship between Medicare prices and hospital utilization in ten states from 1995 to 2009 and concluded that a 10 percent reduction in Medicare payment levels was associated with a 4.6 percent reduction in discharges among beneficiaries due to a reduction in staff beds and fewer services provided to seniors. Hospitals showed typical profit-maximizing behavior in that they increased output when Medicare prices were high and decreased output when the cost to maintain production went up. Hospital responses to Medicare prices changes have historically had the largest effect on Medicare expenditure reduction.

(Source: White, C. and Yee, T; “When Medicare Cuts Hospital Prices, Seniors Use Less Inpatient Care”; Health Affairs; October 2013)

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On the Hill & In the Courts

CR signed to end government shutdown, HHS to report on ACA income verification

Last Wednesday, Congress passed a continuing resolution (CR) signed by President Barack Obama in the early hours of October 17, known as H.R. 2775, Continuing Appropriations Act, 2014. This act ended the 16-day government shutdown and prevented the nation from defaulting on its debt. The CR will extend the U.S. debt ceiling through February 7, 2014; and, provides appropriations for Federal government functions through January 15, 2014 (at sequestration levels). The CR also included language that requires the U.S. Department of Health and Human Services (HHS) to provide Congress with a report on the status of ACA income verification by January 1, 2014 that details the measures that will be used to verify eligibility.

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Groups urge FDA to use risk-based approach to REMS

Advocacy and industry groups, including The Society for Women's Health Research (SWHR), Pharmaceutical Research and Manufacturers of America, the American Pharmacists Association (APhA) and the Biotechnology Industry Organization urged the FDA to take a risk-based approach and allow for individual variation when standardizing the Risk Evaluation and Mitigation Strategies (REMS), a system designed to evaluate if the benefits of a drug outweigh the risks. FDA is considering how to modify REMS to increase the consistency of prescriber-directed, patient-directed and drug dispensing tools, among others. The concern from advocacy and industry groups is that certain drugs may not be appropriate to standardize and doing so may compromise patient safety. SWHR voiced particular concern about the effect new REMS could have on women’s health. APhA suggested the FDA structure REMS by tiers according to the risk-level associated with the drugs, which is similar to the protocol the FDA already uses with Transmucosal Immediate-Release Fentanyl (TIRF). The FDA is expected to release its final guidance by the end of FY2013.

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NAMD urges policy makers to revise mental health policies

Last week, the National Association of Medicaid Directors (NAMD) sent a letter to Senate Finance Committee members Max Baucus (D-MT) and Orrin Hatch (R-UT) urging them to create and revise policies that would increase access to and improve the quality of mental health services for patients. NAMD directors recommended the following:

  • Updating federal mental health and substance abuse policies to better integrate current models of care
  • Improving the Medicaid model of care to create a more integrative approach, emphasizing prevention and wellness in Medicaid policies and increasing efforts to coordinate care among Medicaid state agencies
  • Encouraging “model state programs”
  • Creating incentives for better coordination at the federal and state levels

NAMD also addressed the issue of individuals “churning” between Medicaid and HIXs, supportive housing for Medicaid beneficiaries, information technology systems facilitating communication between providers and the Institutions for Mental Disease Payment Exclusion.

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OIG provider self-disclosure protocol: updates and implications

Since inception of the Office of Inspector General's (OIG) Provider Self Disclosure Protocol (SDP), there have been over 800 reported disclosures resulting in recoveries of more than $280 million to Federal Healthcare Programs.  Now after issuing three Open Letters to Health Care Providers (2006, 2008 and 2009) to solicit additional feedback, effective April 17, 2013 the OIG implemented a number of new requirements for voluntarily identifying, disclosing and resolving potential instances of fraud involving Federal health care programs. In a recent @Regulatory update, the Deloitte Center for Regulatory Strategies summarized considerations for providers who submit violations in accordance with the updated SDP.

Note: @Regulatory is a feature in the Health Care Current, providing the latest regulatory, legislative and other public policy developments affecting life sciences and health care organizations. To access the @Regulatory newsletter, visit the website here.

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Around the Country

CA Governor vetoes biosimilar bill

Last Saturday, California Governor Jerry Brown (D) vetoed Senate Bill 598, a biosimilar bill which would have given pharmacists the authority to substitute an FDA-approved biosimilar in place of a prescribed biologic product. The bill would have also required the dispensing pharmacy to notify the prescribing physician of the change within five business days, as well as to alert the patient of the change. Governor Brown described the legislation as being controversial and premature, since there has not yet been agreement on the prescriber notification clause and the FDA has yet to determine what standards biosimilars would have to meet in order to be considered interchangeable with biologics. Opponents of the bill, including generic drug manufacturers and large purchasers, argued that the prescriber notification clause would undermine and “cast doubt” on the alternatives to biologics. Similar bills have been enacted in Virginia, Oregon and Utah.

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Technology associated with compensation of hospital CEOs

A study released in JAMA Internal Medicine last Monday reported that the compensation for chief executive officers (CEOs) at not-for-profit hospitals varied widely and is associated with technology and patient satisfaction, but not with processes of care, patient outcomes, or community benefit. Highlights:

  • The average salary of hospital CEOs was $595,781
  • CEOs at larger, urban and teaching hospitals had higher compensation, upwards of $1.6 million compared to their smaller, more rural, non-teaching counterparts who made a median of $117,933
  • CEOs were paid an average of $52,000 more at hospitals earning higher patient satisfaction scores and earned roughly $136,000 more in hospitals that had complex technical capabilities
  • Relationships between hospital’s financial performance, process quality performance, mortality or readmission rates and the CEO’s compensation were insignificant

Note: led by Harvard School of Public Health, the study drew on data from IRS Form 990 submitted by 2,691 hospitals.

(Source: Joynt, K. et al.; “Compensation of Chief Executive Officers at Nonprofit US Hospitals”, JAMA Internal Medicine, October 2013)

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Breaking Boundaries

Cleveland Clinic releases top 10 medical innovations for 2014

Last Wednesday at the Medical Innovation Summit, Cleveland Clinic released their list of the top ten “game changing” medical innovations they anticipate to have the greatest impact on patient care next year. Highlights:

  • Retinal prosthesis system: FDA approved a new technology that combines a surgically implanted retinal prosthesis, video camera-enabled glasses and a video-processing unit carried or worn at the waist to treat severe cases of retinitis pigmentosa, a degenerative eye disease
  • Genome-guided solid tumor diagnostics: genomics will be increasingly used to analyze the genes in a person's cancer tumor; analysis can predict the aggressiveness of the cancer, reducing unnecessary cancer treatments
  • Responsive neurostimulator for intractable epilepsy: an implanted neurological device that can significantly reduce the frequency of epileptic seizures; the device is implanted under the skin of the skull and records patterns delivering short electrical pulses to interrupt triggers before any seizure symptoms occur
  • Perioperative decision support system: a new anesthesia management system that better tracks a patient's vital signs and gathers all the data while a patient is under anesthesia during surgery
  • TMAO assay: TMAO, or trimethylamine N-oxide and is a microbial byproduct of intestinal bacteria; an important biomarker for heart disease discovered by scientists that could be used as a screening tool to predict future risk of heart attack, stroke and death

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Launch of virtual personal assistant for healthcare

Last week, Next IT launched Alme for Healthcare, a virtual personal assistant that understands medical terminology and can communicate with patients. The technology platform was designed to provide real-time customer service support to patients. Using natural language processing and artificial intelligence, the technology guides patients through a number of health care processes, answers questions about insurance, finds physicians, tracks personal goals, suggests healthy food choices, sends reminders, shares lab results and communicates basic information. Next IT anticipates the platform will be used to help address chronic disease management and help adherence to complex treatment regimens.

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HIE services save over $1 million in South Carolina

Research conducted by the Medical University of South Carolina revealed that provider access to health information exchanges (HIE) improved emergency care quality and saved $1,035,654 in patient charges (approximately $2,000 per patient) over a 12-month period. A study presented last week at the annual meeting of the American College of Emergency Physicians found that access to HIE services decreased the use of laboratory/microbiology, radiology, consultation and hospital admission services, along with improving the quality of care as reported by 89 percent of the participants. Most participants (89 percent) also indicated that valuable time was saved, reporting an average time savings of 105 minutes per patient. Researchers analyzed data from 325,740 patient encounters and 7,525 log-ons to the HIE by 231 eligible clinicians at 11 emergency departments in 2012 in South Carolina.

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