MDs' Prescription Activity Seen Hiking Comp Cost

Among the other key findings the insurance rate setting group said were figures showing that workers' compensation systems paid roughly 125 percent of the average wholesale price of prescription drugs, while group health operations paid 72 percent.

The report also said that the prescription drug share of workers' comp medical costs rose from 6.5 percent in 1997 to 9.6 percent in 2001 using the year the accident occurred.

It was noted that if the yearly cost for a fixed regimen of medical treatment begins at $10,000 and there is annual medical cost inflation of 10 percent, then the cost for these medical treatment services will be nearly double by the eighth year after the accident.

Generic equivalent drugs, the report said, are prescribed, when available, 79 percent of the time for workers' comp claims.

Barry Llewellyn, NCCI senior divisional executive for regulatory services, based in Hoboken, N.J., one of the reports authors said he was surprised by the fact that generics were that widely prescribed. "Frankly, that's been one of the leading attempts to control costs. Apparently it's happening.

Mr. Llewellyn, at the same time noted the high rate of prescriptions for the aggressively promoted non-generic pain killer Oxycontin, which he said is normally reserved for only the most severe cases of pain such as the last stages of cancer.

The researchers found that 56 percent of comp drug costs are associated with drugs having no generic equivalent. So savings from generics are available for only about 8 percent of comp drug costs overall. The other drugs where there is a generic alternative is picked at a very high rate.

Painkillers, the report said, represent 55 percent of the cost of workers' comp prescriptions.

Explaining drug utilization, which the report said has a greater impact on comp drug costs than price, researchers said it includes "movement to new or more powerful drugs and an increase in the number of prescriptions."

Factors, that were found to increase utilization include:

? Greater availability and dependence on medications for treatments.

? Aggressive marketing?major pharmaceutical manufacturers spend more than twice as much on marketing and administration than on research and development, said NCCI. Drug promotions reached nearly $19.1 billion in 2001, the report said.

? The aging workforce, which requires greater support from prescription drugs.

? Increased access through insurance coverage.

According to NCCI estimates, if generic drugs were prescribed 100 percent of the time when they could be substituted for brand name drugs there would be an 8 percent savings for the workers' comp system.

After painkillers, accounting for 55 percent of comp drug costs, the study found that muscle relaxant drugs were responsible for 20 percent of the prescription costs for workers' comp and antidepressants 14 percent.

The top 10 prescribed drugs by total paid in workers' comp were: Celebrex anti-inflammatory, Oxycontin painkiller, Vioxx anti-inflammatory, Hydrocodone painkiller, Neurontin painkiller, Ultram painkiller, Carisoprodol muscle relaxant, Cyclobenzaprine muscle relaxant, Soma muscle relaxant and Ambien sedative.

Half of the top 10 had no generic alternative.

Heavily promoted Celebrex and Vioxx in 2000 accounted for almost 10 percent of the growth in prescription drug sales, it was noted.

The report discussed using pharmaceutical benefits managers to control the kind of drugs prescribed and using negotiation to control costs.

It said that most pharmaceutical benefits managers do not have workers' compensation specific contracts and suggested that "pharmacies may be reluctant to surrender the current profits reaped from workers' comp prescriptions. In addition, price discounts do not necessarily translate into cost reductions, since there is little control over the level of average wholesale price."

The report said a number of state legislatures have considered legislation to establish pharmacy fee schedules, which it said can be part of an effective cost containment strategy addressing unit prices of prescription drugs.

In 2001, 23 states were found to have had workers' compensation fee schedules for prescription drug payments.

The researchers said that while establishing fee schedules is important, setting the appropriate fee levels is probably the most critical aspect. NCCI said setting fees too high will unnecessarily increase costs and setting fees too low may result in restricted access or increased utilization.

Linking fee levels to average wholesale price may result in illusory savings, "as average wholesale price is uncontrolled and subject to significant upward pricing pressures (much like the "sticker prices" on automobiles)," the report said.

Examining legislation mandating the use of generic drugs where appropriate, NCCI said that "not only would direct cost savings be achieved through legislating the increased use of generics, but also the expense that many states incur by offering incentives, such as higher dispensing fees and/or percent of average wholesale price paid to encourage pharmacists to dispense generic drugs would be eliminated.

However, NCCI noted that generics are already widely prescribed in the comp system so the savings would be small.

Mr. Llewellyn co-authored the study with Jeanne Emond, with contributions from Barry Lipton, Chris Poteet, and Jim Stevens. The full study is available at the NCCI Web site, www.ncci.com.