Annual Drug Trends Report Shows Rising Costs

Recent estimates indicate that pharmacy accounts for approximately 14.2 percent of total medical costs. More importantly, as a claim ages, pharmacy consumes an even greater percentage of medical costs -- by year three post-injury, pharmacy spend represents 80 percent or more of total workers' compensation medical spend.

The following data, taken from PMSI's 2009 Annual Drug Trends Report, compares and evaluates pharmacy spend to determine where you should focus the majority of mitigation efforts for optimal cost containment. Based on a data set of nearly eight million transactions ranging from 2006-2008, this year's report is one of the most extensive analyses of workers' compensation pharmacy transactions available.

Understanding the Spend

Overall, the workers' compensation industry experienced a 5.4 percent growth in total pharmacy spend per injured worker in 2008. Similar to 2007, the majority of the increase was driven by the change in price per prescription. However, the rise was also influenced by utilization changes. Both price and utilization have non-controllable and controllable factors that must be taken into consideration when evaluating your pharmacy program.

Non-controllable factors are considered to be outside the direct influence of Pharmacy Benefit Management (PBM). Examples of non-controllable factors include average wholesale price (AWP) increases (also known as inflation), new brand introductions, new generic introductions, loss of generic products, age of injury, and prescribing patterns. While these market factors usually receive the most attention, they should not be the central focus of cost containment efforts.

Controllable factors can be directly affected by PBM activity. These include network penetration, mail order utilization, generic substitution, formulary development, and clinical pharmacy review programs. A focus on these items will help to mitigate increases in total pharmacy spend.

Top Spend Influencers for 2008

AWP -- Historically, AWP has remained relatively constant for generic medications, while brand medications have shown steady increases. The report shows that this trend continues, with an AWP increase of 9.3 percent for brand medications and a negligible increase in generic AWP. Since brand-name medications account for 64.4 percent of total spend, the combination of brand and generic AWP changes resulted in an overall increase in price per prescription of 6.1 percent for 2008.

OxyContin -- There was one drug that significantly contributed to the increase in total spend -- OxyContin^(R) (oxycodone). Always a heavily prescribed drug, OxyContin became even more expensive after the low-cost generic supply was severely affected in the aftermath of a patent case. Because the OxyContin and its generics accounted for 9.3 percent of total drug cost, the dwindling supply of generic OxyContin products and the increase in cost, the net result was a .9 percent increase in the total average price per prescription.

Age of Injury -- Another key cost driver is the age of an injury. In 2008, the average age of injury increased from 4.7 years to 4.8 years between 2007 and 2008 -- a difference of 1.3 percent. As the injury ages, there is an increase in the number of prescriptions taken per year, and usually an increase in price per prescription as well. The factors driving these increases include the use of higher doses of medications, a transition to more costly medications, and the addition of medications from multiple therapeutic classes. This trend appears to continue until after the eighth year of injury, when the increase in the number of prescriptions and the average prescription price begin to level off.

Top Pain Management Medications

In workers' compensation, medication use is predominantly related to pain management. This is confirmed by the fact that all of the top five medication classes by spend are used in the treatment of pain. In addition, there has been almost no movement between these top classes over the past few years. Opioid analgesics, non-steroidal anti-inflammatory drugs (NSAIDs), anticonvulsants, skeletal muscle relaxants and antidepressants accounted for 70 percent of the total drug expenditures and 74 percent of total transactions in 2008.

Although the top medication classes have not changed significantly, the individual medications within each class have changed with regard to utilization and total expense:

• Lyrica, due to its FDA indication for neuropathic pain, replaced Neurontin(R) as the highest-cost anticonvulsant in workers' compensation.
  
• Fentora and Actiq, short-acting opioids used in the treatment of pain, had an overall decrease in utilization of 17 percent. However, because of significant price increases, these products accounted for 3.5 percent of the total workers' compensation drug spend.
  
• Opana(R), a narcotic analgesic similar to oxycodone that is available in both short-acting and long-acting formulations, had an increase in utilization of 89 percent, moving it up to the list of top 20 medications by total cost.
  
• Effexor(R) XR was displaced from the top 20 list by Cymbalta(R), an antidepressant indicated for the treatment of chronic pain, which experienced a significant increase in utilization of nearly 14 percent.

Armed with trend information, payers should be able to use the report as a benchmark to evaluate and compare their own pharmacy programs. This insight, along with an understanding of factors driving drug price and utilization, should allow managers to make sound business decisions in determining where to focus program efforts for optimal cost containment and risk mitigation.

Given the complexity of workers' compensation pharmacy claims, payers should look to partner with a PBM tailored to the specific nuances of the workers' compensation market. An effective PBM will work with the payer to identify opportunities to improve network penetration, increase generic substitution, maximize mail order utilization and engage clinical utilization management programs. Maximizing these opportunities will reduce expenses and improve care for injured workers.

Maria Sciame is the director of clinical services at PMSI, one of the nation's largest providers of specialty products and services for the workers' compensation market. Dr. Sciame holds a Doctor of Pharmacy Degree from the University of Florida, College of Pharmacy where she serves as a Clinical Assistant Professor of Pharmacy. The complete 2009 Annual Drug Trends Report is available at www.pmsionline.com.