Utilization Rates as Primary Drivers of Workers’ Compensation Prescription Drug Costs

NCCI Study Analyzes Medical Benefits Expenses

Knowing that high prescription drug costs are a large component of the current challenges related to curbing workers’ compensation expenses is of limited value. Finding feasible methods to reduce the overall cost of providing workers’ compensation benefits requires fully understanding why those costs are at their current levels.

A September 2013 Research Brief from the National Council on Compensation Insurance, Inc. (NCCI) provides insights regarding prescription drugs costs in workers’ compensation systems; this brief, which is titled “Workers’ Compensation Prescription Drug Study: 2013” reflects the finding of an NCCI study that comprehensively examines many factors that include:

> Overall prescription trends;

> Cost differences between physician-dispensed and pharmacy-dispensed prescriptions; and

> Ratios between prescriptions for narcotic and non-narcotic drugs.

Sources of Underlying Data

The study reflected data both from workers’ compensation insurers and the Medical Data Call database that NCCI maintained. The timeframe of this information encompassed medical care that claimants received between 1996 and 2011 for compensable harm that they sustained between 1994 and 2011.

The prescription drugs in the study were limited to drugs that either had a National Drug Code or a “carrier-specialized drug code.” The study excluded the cost of drugs that were combined with other services and coded accordingly, such as being included in a Hospital Revenue Code.

Prescription Drug Costs as a Percentage of Total Workers’ Compensation Medical Benefits

The research tracked the trend of the cost of prescription drugs as a percentage of the total cost of providing medical care within the workers’ compensation system. One observed pattern was that the cost of those drugs generally tended to increase at a faster rate than the aggregate costs of providing that care. The study results also indicated that that percentage has flattened out at roughly 18 percent over the past few years after peaking at an estimated 19 percent a few years ago.

A related conclusion was that the cost of prescription drugs significantly increased as a percentage of the total medical expenses over the life of a workers’ compensation claim. For example, the research showed that that percentage was roughly three percent during the first couple of years of a claim and rose to above 40 percent for claims that lasted an excess of 11 years. Comparing compensable incidents from the past few Service Years with those from less recent Service Years indicated an overall trend toward prescription drug costs constituting a higher percentage of total medical care costs than they had during that earlier period.

Comparing Price and Utilization Trends During a Claim’s Life

The preliminary data revealed both that the per-claim costs of prescription drugs increased six percent in 2010-2011 and that both the price of those drugs and the prescription habits of medical-care providers were equal factors regarding that result. That contrasted with a 12 percent increase in 2008-2009 and a 9 percent increase in 2009-2010. The data from those years reflected that the utilization rate increased much more than the prices of those drugs during those periods.

This data resulted in concluding that changes in prescription habits influenced the per claim cost of prescription drugs more significantly than changes in the prices for those prescriptions.

The study attributed a decreased utilization rate regarding prescription drugs in the 2004-2005 period to removing the Cox-2 inhibitors Vioxx and Bextra from the market and revising the warning label on the Cox-2 inhibitor Celebrex. The data additionally observed a decreased number of prescriptions per workers’ compensation claim during that period.

Physician-Dispensed v. Pharmacy-Dispensed Drugs

Increased levels of physician-dispensed drugs were cited as a reason for higher utilization rates between 2008 and 2011. One element of this was a rise in the number of per-claim prescriptions in 2009-2010 and 2010-2011.

Comparing the prices of physician-dispensed and pharmacy-dispensed prescriptions within a workers’ compensation system showed that the average-per-claim cost of physician-dispensed drugs increased from $24 to $30, or roughly 25 percent, between Service Year 2007 and Service Year 2008. This was compared to an estimated 5 percent increase in the cost of prescriptions filled by other means during that period.

Comparing statistics related to the number of prescriptions per-claim in the period between Service Years 2007 and 2011 revealed a 14 percent rise in the amount of per-claim prescriptions that physicians filled between Service Year 2007 and Service Year 2011 contrasted with an 8 percent increase in the number of per-claim prescriptions from other sources during that period.

Effect of Mix of Prescribed Drugs

The study concluded that in Service Year 2011 the top 20 drugs prescribed within the workers’ compensation system made up almost 54 percent of the total dollars spent for prescription drugs to treat injured workers, and that these top ranked drugs included mainly pain medications, such as OxyContin.

Additionally, the study observed that generic drugs comprised more than 50 percent of the drugs that claimants were prescribed, but most of the cost of those prescriptions was attributable to the brand-name equivalents of the drugs. Brand-name drugs comprised 24 percent of the prescriptions in the workers’ compensation system but accounted for 56 percent of the cost of those drugs during Service Year 2011.

To illustrate further using the top five drugs, the brand-name drugs OxyContin, Lidoderm, and Lyrica made up a combined 16.9 percent of total prescription drug costs, and the generic drugs Gabapentin and Hydrocodone-Acetaminophen made up a combined 7.8 percent of total prescription drug costs.

National statistics showed that the costs of narcotic drugs comprised 25 percent of the total cost of prescription drugs in the national workers’ compensation system but was more than 30 percent in most jurisdictions in the northeast region of the United States. The total per-claim amount of the cost of narcotics claims has increased from $39 in Service Year 2003 to $59 in Service Year 2011 but seemed to somewhat level off during the past few service years.

Final Thoughts

The study results further validated that prescription-drug costs constituted a high percentage of the expense of treating claimants within the workers’ compensation system. This work additionally provided hard numbers that supported the theories that utilization rates and the mix of prescribed drugs were significant factors regarding those results.

These findings demonstrated the importance of reasonable regulation directed at the trends regarding those aspects of workers’ compensation, as well as the other areas of concern that the research addressed.

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