The risk management community is correctly recognized as the driving force behind efforts to reduce the cost of lost-time claims in the past decade. The National Council of Compensation Insurance (NCCI) reports medical costs account for at least two-thirds of all workers’ compensation costs. A decade ago, indemnity costs accounted for sixty percent of total workers’ compensation loss costs. Clearly, through a continued focus on return-to-work programs, employers engineered this dramatic shift.
However, as injury rates have declined workers’ compensation pharmacy costs continue to rise. Recently, PMSI, a pharmacy benefit manager and provider of specialty services for the workers’ compensation market, announced pharmacy spending for workers’ compensation increased by 5.4% in 2008, compared to 3.3% in 2007.
PMSI studied workers’ compensation drug spending trends between 2006 and 2008. They report pharmacy costs now represent approximately 14% percent of the total medical spending in workers’ compensation.
Reasons for the Increased Costs
Pharmaceutical spending is up. While injury rates are down, treating physicians are increasingly prescribing drugs as part of the treatment plan.
Drug prices continue to rise. Wholesale prices continue to increase coupled with a decline in the generic brand of the most prescribed drugs.
The top five drugs prescribed in 2008 remained unchanged from 2007. This group accounted for three-fourths of the total pharmacy costs in 2008.
There is a direct correlation between the age of the claim and the pharmacy costs. The older the claim, the greater the percentage of the total claim pharmacy costs. In fact, NCCI reports in 2007, prescription drug spending in the first year averages only three percent of medical costs, but by year seven that number jumps to almost 31% of overall medical costs.
Antidepressant prescription and use in workers’ comp cases is on the rise.
Suggestions to Mitigate Increased Pharmacy Costs
Develop and implement a pharmacy benefit management plan addressing these issues.
- Network penetration — how effective? Opportunities for improvement?
2. Generics— look for opportunities to increase substitution.
3. Mail-order — what is the utilization? How can it be increased?
4. Intervention — consider using a third-part pharmacy benefits manager.
Author: Robert Elliott, J.D.
Click on these links to try it for yourself.
WC Calculator: www.ReduceYourWorkersComp.com/calculator.php
TD Calculator: www.ReduceYourWorkersComp.com/transitional-duty-cost-calculator.php
WC 101: www.ReduceYourWorkersComp.com/workers_comp.php
Do not use this information without independent verification. All state laws are different. Consult with your corporate legal counsel before implementing any cost containment programs.
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