The National Council on Compensation Insurance has released its latest workers' compensation prescription drug study that shows the increase in drug costs is accelerating at a slower rate than previous years. According to the study, the cost of prescription drugs for workers' comp and group health plans alike, increased by 8.2 percent in calendar-year 2004 as opposed to the 10.2 percent increase registered in 2003 and 14 percent in 2002. Even with the slight reduction in cost trends, however, the council found that the drug portion of the workers' comp total medical dollar continued to increase, reaching 13.4 percent in 2003.
The Centers for Medicare and Medicaid Services cited several factors associated with the decline in drug cost trends. First the center cited the emphasis on using lower-priced generic drugs and over-the-counter drugs, such as antihistamines and antacids. Also noted was the shift toward using mail-order drugs and a reduced use of certain drugs based on concerns over their safety. Those drugs include Celebrex, Vioxx, and Bextra, which were formally some of the most prescribed drugs in the workers' compensation system.
Background
To understand how drug costs contribute to overall medical costs, there are several factors to keep in mind. First of all, workers' comp claims can be open for years, requiring insurers to pay benefits over an extended period of time. Therefore, claims' costs are very sensitive to long-range financial trends, such as medical costs and utilization. For example, if the annual medical costs of a claim is $10,000 and the yearly medical inflation rate is 10 percent, by the tenth year of the claim the costs would be nearly double the first year. This is why NCCI calculates claims' costs on an accident-year bases, which includes premiums collected and benefits paid in that year, as well as the monies set aside for future claims' costs.
Claims payout patterns play an important role with the price of drugs and their utilization trends remain the dominant factors in determining pharmaceutical costs. In previous studies, NCCI citied several issues that contributed to costs:
oThere are more and more drugs available to physicians who, in turn, are using more medications to treat injured workers.
oThere is an increased access to medications through insurance coverage.
oThe workforce is aging and developing medical conditions that call for a greater use of drugs over a longer period of time.
oPharmaceutical manufacturers are aggressively marketing newer drugs.
Key Findings
NCCI's study included ten states including California, Colorado, Florida, Illinois, Kentucky, Maine, North Carolina, Oregon, Tennessee, and Texas. The majority of those states reported drug cost increases between 10 percent and 15 percent, which mirror the findings for all states. Illinois and Texas reported cost increases of less than 10 percent, while Florida and Kentucky had increases of 15 percent or more.
NCCI conducted a case study to determine the discrepancy in costs between Illinois and Florida. Of note, Florida law specifies that the rate of payment per prescription drug is the average wholesale prices plus a dispensing fee of $4.18. In the study, the council found that one major factor between the states was the utilization of drugs. While Florida reported having drug costs in one out of three claims, Illinois reported paying out drug costs in one out of six claims. Illinois also used more generic drugs that resulted in the state paying less per unit than Florida.
NCCI found that the most often prescribed category of drugs remained anti-inflammatories and painkillers, representing 52 percent of total drug costs in 2003. Muscle relaxants were ranked second at 19 percent, and central-nervous-system drugs, such as antidepressants, ranked third at 12 percent. It should be noted that when it comes to ranking specific drugs, NCCI's data does not reflect some of the volatility in the use of drugs due to recent regulatory action, especially with regard to the class of drugs known as COX-2 inhibitors. The anti-inflammatory drugs represented 15 percent off the total amounts paid for drugs in 2003.
In September 2004, the drug maker Merck & Company voluntarily pulled Vioxx from the market, which in 2003 was the sixth most prescribed drug in the workers' compensation system. At the same time, the federal Food and Drug Administration and the drug-maker Pfizer reached an agreement where by Pfizer could continue marketing Celebrex with the adage that the drug had to be accompanied by a more detailed list of its potential risks. Pfizer also agreed to voluntarily suspend the sales of Bextra.
Hartford Study
While the NCCI study is invaluable for its analysis of drug costs, The Hartford Financial Services Group has released a more up-to-date study when it comes to current prescription drug use. While The Hartford had been reporting small increases since it started its annual study in 2001, the 2005 results mark the first time that the costs actually declined.
Dr. Robert Bonner, the medical director for The Hartford, said the introduction of some new generics and a curb on the use of COX-2 inhibitors has worked to lower costs. "The emergence and increased use of generic substitutes for OxyContin and Neurortin, two of the most expensive and widely used drugs for treating pain in workers' compensation cases is having a significance effect on pharmaceutical costs," he said in a statement accompanying the release of the study. "In addition, the withdrawal of the popular COX-2 inhibitors Bextra and Vioxx, which were frequently taken to manage pain and inflammation is helping to drive down pharmacy costs for patients receiving care under this system."
The results of The Hartford's study did show a variation in utilization and costs. For example, the use of OxyContin declined as physicians prescribed different drugs such as the generic version Oxycodone. Even with the different utilization patterns, however, the costs of these painkillers in both original and generic form increased by six percent. On the other hand, last year's second most prescribed drug Neurontin fell to 20th as it was pushed aside by a new generic Gabapentin. The generic is priced 35 percent lower than Neurontin. The use of the inexpensive painkiller Tramadol also increased by more than 50 percent moving it up from the 17th on the list to 12th. The third most prescribed drug is Ibuprofen, which, based on costs, did not make it into the top 25 list. The use of Ibuprofen is expected to increase as it becomes an alternative to Vioxx and Bextra.
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