Drug Costs Send Workers Comp Bills Soaring Insurers hard put to contain expenses with utilization of medications on the rise
Increased use of costly prescription pharmaceuticals has been having a greater financial impact on the workers compensation system than rising drug prices, but that trend could be ending, a leading data group reports.
The research by the Boca Raton-based National Council on Compensation Insurance also revealed that the recently recalled anti-inflammatory drug Vioxx was third among the top-10 most costly prescribed drugs paid for by workers comp insu
rers from 1997 to 2002.
Among different varieties of drugs, the workers comp system spent more on painkillers54 percentthan any other type, the study found. Muscle relaxants accounted for 18 percent of payments for prescriptions, and antidepressants another 15 percent.
NCCI said that prescription drugs share of workers comp medical costs rose from 10.1 percent in 1997 to 12.1 percent in 2002, but that between 1997 and 2001, "utilization had a greater impact on WC drug costs than price."
Companies might be focusing on expanded use of drugs, and "it will be interesting to see if this change is just a one-time occurrence or the beginning of a new trend," the report said.
Although from 2001 to 2002 drug price hikes slightly outpaced the impact of utilization on overall drug costs, "most knowledgeable observers agree that utilization is the more important driver of medical costs," the studys authors wrote.
According to NCCI, the workers comp system is already prescribing generic drugs when available, so there is little opportunity for savings by increasing their usage. Generic drugs as prescriptions, when they are available as a non-brand alternative, rose from 79 percent in 2001 to 86 percent in 2002, the survey found.
Among its rankings, NCCI said the use of some prescriptions has recently soarednotably the Bextra-brand pain killer, which moved from number 1,852 to 19 on the list.
The study said that 28 states have put a drug reimbursement schedule in place to control costs, using average wholesale price as a mechanism for reimbursement.
Barry Llewellyn, one of the reports authors, said he had expected to find that the medical cost share represented by drugs had increased, but was surprised to learn so many states had fee schedules.
The most important finding, he added, was that states "all use average wholesale price" as a basis for their fee schedules, "which is a creation of the drug manufacturers. It is not subject to any regulatory review. Its this is what we would like to get for our drugs. Its similar to what car manufacturers put on as a sticker price."
Therefore, he said, "if policymakers think they have done something to control medical costs from drugs, the use of average wholesale price in the formula for putting limits is not going to do much to hold costs in line."
Some states have a higher dispensing fee for generics, while nine states reimburse up to a level above the average wholesale price in a range from 4 percent to 40 percent, the study found. Eleven states reimburse up to the average wholesale price level, while eight states reimburse up to a level that is 5-to-15 percent below it.
NCCI noted that the Workers Compensation Insurance Rating Bureau in California estimates that recent reform legislation in the statewhich includes mandatory generic substitution and a revised pharmacy fee scheduleshould create cost savings of 1 percent of total workers comp costs, to save $249 million.
Reproduced from National Underwriter Edition, October 7, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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