The primary concern of the workers’ compensation industrycontinues to be centered on pharmacy spend. A workers’ compensationpharmacy benefit management (PBM) offering must control costs andrespond to industry issues. Successful PBM programs should drivenetwork and mail order penetration and optimize outcomes throughstrong, industry-specific clinical oversight.

The importance of understanding spending trends, mainstreamchallenges and the industry landscape being faced by payers andemployers cannot be overemphasized. A comprehensive analysis of theworkers’ compensation industry should be based on robustinformatics and a keen understanding of market trends.

For the past four years, PMSI has issued a studyof drug trends in the workers’ compensation arena. Its recent2011Annual Drug Trends Report provides a review of 2010 pharmacyspend and strategies for mitigating pharmacy cost. The 2011 reportfindings are based on data analysis of PMSI’s 5.4 million retailand mail order transactions during calendar years 2008–2010.

The report identifies the top 10 drivers that affect pharmacyspend across the areas of cost, utilization and drug mix; providesperspectives regarding pharmacy benefit management and clinicalprograms; and explores industry trends, such as physiciandispensing, expanded use of pharmacy networks, pain management, andthe broadening of formularies and utilization controls.

Drivers Impacting Pharmacy Spend

A sharp reversal in the overall pharmacy spend per injuredworker was experienced in 2010 with a decrease of 2.3 percent, ascompared to a 6.9 percent increase in 2009. This decline was madeup of a variety of factors related to cost and utilization,including the effectiveness of clinical controls and mail orderpenetration strategies. The most important findings of the reportare:

1. Average Cost per Day of Supply: Average drug cost per day ofsupply fell 2.0 percent from $5.03 to $4.93. The decrease wasattributed primarily to three factors: The limited averagewholesale price (AWP) increase in 2010, increased use of generics,and increased mail order penetration.
2. AWP Change: Average wholesale price changes represented a 3.5percent increase in the average cost per day of supply in 2010—45percent less than the increase in 2009.
3. Brand and Generic Mix: Generic efficiency increased to 92.6percent in 2010 while the average cost per day of supply of ageneric medication was approximately 70 percent less than a brandmedication.
4. Mail Order Impact: Mail order penetration increased to 29.3percent while the cost per day of supply through mail order was 19percent less than through a retail pharmacy.
5. Days of Supply per Injured Worker: A 0.3 percent reduction inaverage days of supply was observed. This decrease in prescriptionutilization was related to a decrease in dosing frequency and theuse of medications for shorter durations.
6. Dosing Frequency: During 2010, there was a 1.8 percent decreasein the average number of doses per day.
7. Duration of Injury: The overall duration of injury increased by1.0 percent to 4.7 years. Despite this, prescription cost andutilization notably decreased, especially for claims older thanthree years.
8. Generic Dispensing and Efficiency: The generic dispensing rateincreased 3.5 percent over the prior year and generic efficiencyalso increased 0.7 percent over 2009.
9. Duration of Injury and Impact of Generic Medications: Incontrast with previous years, generic efficiency increased asclaims aged, especially for those over four years old.
10. New Medication Releases: New medications released in 2010 hadonly a small impact on total drug spend.

Drug-Specific Trends

Consistent with previous years, over 75 percent of total drugspend was associated with medications used for the treatment ofpain. Narcotic analgesics continued to lead overall spending;however, other medication classes, such as non-steroidalanti-inflammatory drugs and skeletal muscle relaxants were usedearlier in the course of therapy compared to narcotics. Also ofnote is the increased use of dermatologics (such as Lidoderm)across all phases of the injury, especially during the early yearsof therapy.

Mainstream Challenges and Industry LandscapeTrends

An understanding of the challenges and trends in the workers’compensation pharmacy landscape provides a strong foundation forimplementing solutions to contain costs. One should understand theimpact of trends such as: repackaging and physician dispensers, theuse of compounded medications, the impact of state pharmacynetworks, the use of mandated formularies and utilization controls,and the impact of pharmacy cost on Medicare set-asideallocations.

Maximizing a PBM Program

In order to drive cost containment solutions that maximize theeffectiveness of a pharmacy program, one should partner with a PBMthat provides innovation and focus. Programs should look toincrease in-network transactions through the use of injuredworker-friendly materials, capture out-of-network spend withconversion programs, guide to mail order to further contain cost,ensure optimal outcomes and minimize waste with clinical programs,and enhance efficiency through technology.