Comp Pharmacy Inflation Seen As Slowed

Increases in workers' compensation pharmacy cost inflation slowed last year according to a study by a consulting firm, which attributed the reduction to cost controls.

Madison, Conn., Based Health Strategy Associates reported that finding in its Fourth Annual Survey of Prescription Drug Management in Workers' Compensation.

The poll of large and medium workers' compensation payers was sponsored by Atlanta-based Cypress Care, a pharmacy benefit management firm.

HSA said workers' compensation pharmacy costs among the 21 respondents rose only 6.5 percent between 2005 and 2006, compared with a drug cost increase of 18 percent noted in the 2003 survey.

Despite significant price increases in 2006, there was a three point decrease in the rate of pharmacy cost inflation from 2005 across all respondents, HSA found.

“Investing in tools to manage utilization, more and better data mining and analysis, and implementing programs for managing third-party billers is paying off,” said HSA's Principal Joseph Paduda.

One of the payers surveyed actually decreased its drug spending by 8 percent, yet another reported a 20 percent increase, HSA reported.

The firm said payers experiencing higher costs attributed inflation to higher utilization, physician prescribing behavior, the over-use of pain medications, e.g., Oxycontin and Actiq, off-label use to treat conditions outside the scope of a drug's intended indications, and higher unit prices.

In July, an article in the Journal of the American Medical Association reported a review of previous studies indicated that an increase in prescription drug cost sharing was associated with a drug spending decrease and use of pharmacies. It found, for some chronic conditions, higher cost sharing is associated with greater use of expensive medical services

HSA said utilization remains the most significant cost driver with a continued inability to capture the initial script in-network, off-label dispensing of high-powered pain medications, physician dispensing and repackaged drugs, and third-party billers (TPBs) directly affecting total drug costs.

“Payers indicated more frustration with third-party billers than in past years and some refuse to consider working with them at all because of the increased administrative hassles and expense,” Mr. Paduda noted.

Certain practices, said HSA, appear to be linked with the dramatically improved results enjoyed by some payers. These include using medical advisors to address problematic scripts and prescriber behavior, training adjusters and clinical staff on basic drug issues and trends and providing them access to high level clinical support as needed.

Carded programs and processing all scripts through a Pharmacy Benefit Manager (PBM) to consolidate data, enhance network steerage and penetration, and identify non-compliant pharmacies were other keys to controlling costs, the study found.

“Overall, payers with the lower drug costs were those with strong and consistent support from senior management who provided sufficient resources for analysis and reporting,” Mr. Paduda said.

HAS said the confidential, survey was conducted between Feb. and March 2007.

Twenty-one decision makers at workers' compensation payer organizations (carriers, third-party administrators, managed care organizations, and self-insured employers) participated. These organizations' 2006 drug spending totaled $1.01 billion, representing one quarter of all workers' compensation drug costs.

To obtain a summary of survey results contact Helen Knight, helen@kingknight.com or 813-837-1701.

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