Workers’ comp drug benefit offers fewer levers for cost control

September 1, 2004

Workers’ comp pays 74% more than group health for the same drugs, due to lack of control over AWP and limited purchasing power.

If you thought expenditures for pharmaceuticals were growing rapidly, take a look at prescription drug costs for workers' compensation; they rose from 6.5% in 1997 to 9.6% in 2001, according to the National Council on Compensation Insurance (NCCI). In 2003, these drugs consumed an estimated 10% of total medical costs and registered $2.5 billion on the cost meter. Unfortunately, workers' compensation pharmacy expenditures are a different beast than what you find in group health.

"In workers' compensation, we pay for first dollar and every dollar related to a condition," says Joseph Paduda, principal at HealthStrategy Associates in Madison, Conn. "Unlike group health, you can't utilize a tiered copayment arrangement, require the use of generics or in some states, mandate where patients fill their prescriptions."

"Insurers don't even know who the workers' compensation population is," adds Ruth Estrich, director of networks for MedRisk, a workers' compensation claims management firm based in King of Prussia, Pa. "There are no eligibility lists; workers' compensation is just not employee-driven."

UTILIZATION: KEY TO CONTROLLING COSTS The survey indicates that 80% of respondents say that drug costs are grabbing the attention of senior management. When asked which methods are used to control costs, respondents, who were clearly more concerned about the volume of prescriptions used, preferred utilization-based rather than price-related techniques. These include changes in formulary to restrict refills, tighter medical management, such as changing prescribing physician behavior, and patient-specific utilization management processes.

Paduda's survey also shows that the majority of respondents cite PBMs and their networks and drug utilization tools, along with treating physicians as "levers" for controlling costs.

Phil Walls, vice president of pharmacy services for PMSI-Tmesys in Tampa, Fla., a PBM featuring a nationwide network of pharmacies, favors both prospective drug utilization review (DUR), which highlights contraindicated drugs, duplications and prescriptions that are being refilled too soon, and retrospective DUR. Tmesys generates intervention letters for physicians, providing patient-specific drug profiles to ensure that therapy is working effectively and is being taken appropriately based on medical literature. Walls is not concerned if savings don't accrue as long as the right things are being done clinically.

Although Walls recognizes that the AWP for drugs is increasing 12% to 15% a year, he points to over-utilization of such expensive drugs as Celebrex and Oxycontin for pain and Vioxx as an anti-inflammatory-the top three drugs prescribed under workers' compensation-as lying at the crux of cost increases.

Not only have the popular brand drugs sent costs spiraling, but so has the introduction of costly biologics. The new lollipop narcotic, Actiq, prescribed for breakthrough pain for cancer patients, is sneaking onto physicians' prescription pads as a remedy for chronic pain.

George Furlong, director of medical payment products for CHOICE Medical Management Services in Tampa, agrees that managing utilization is key to controlling costs and places the onus on physicians. "Since no copayment exists in workers' compensation, there is no incentive for the patient to ask for a less expensive drug-a non-steroidal, anti-inflammatory drug instead of a COX-2 inhibitor, for example, so you have to educate the physician," he says.

CHOICE sponsors education seminars for physicians to try to encourage certain prescribing habits and to keep them abreast of current pharmaceutical legislation. CHOICE has experienced 28% lower pharmacy costs per claim in 2003 for all claims with incurred pharmacy expenses.

An NCCI study, comparing prescription drug costs in workers' compensation and group health, attributes an increase in utilization to greater availability of and dependence on medications for treatment, aggressive marketing, an aging work force and increased access through coverage.