NCCI Addresses Workers’ Compensation Prescription Drugs Costs

Increased Utilization of Predominantly Expensive Drugs Fuel Cost Rise

An August 2011 research brief by the National Council on Compensation Insurance, Inc. (NCCI) analyzed the trend of prescription drugs constituting a disproportionately high percentage of workers' compensation expenses. The researchers concluded that a 12-percent increase in the per-claim portion of that expense in 2009 has resulted in prescription drugs equaling roughly 20 percent of workers' compensation costs.

The brief is the latest in an ongoing series of reports that the NCCI has prepared on the cost of prescription drugs in the workers' compensation system. Some notable highlights of the report are:

Demand and Supply. Increases in the total number of prescriptions and the demand for more costly drugs in the workers' compensation system more significantly impacts workers' compensation prescription drug prices than rising drug prices. In simpler terms, the report concluded that it was highly likely that an overall increase in utilizing expensive prescription drugs was a significant reason that the cost of that treatment has reached a noteworthy level.

FDA Approval of Drugs. Widely prescribed drugs in workers' compensation cases include OxyContin, Lidoderm, and Hydrocodone-Acetaminophen. Trends in prescribing particular drugs within the workers' compensation system reflect factors that include FDA approval of those medications. Further, as mentioned above, the proportional cost of prescription drugs compared to other expenses related to workers' compensation claims will likely increase the more that expensive drugs become popular in the system.

Life of a Claim. The trend of prescription drug costs to increase significantly during the life of a workers' compensation claim is another significant factor in that expense being relatively high. The report illustrates this by estimating that prescription drug costs are 3 percent of all medical expenses during the first few years of a workers' compensation claim and then approach 50 percent and begin slowing down after a claim is approximately a decade old.

Prescriptions Filled at Doctor's Office. The researchers observed that a larger number of physicians having patients fill prescriptions in the physician's office, rather than a retail drug store, contributed to the increased cost of providing workers' compensation claimants prescription drugs. The impact of this factor varied significantly across the country because the percentage of physicians who engaged in this practice ranged dramatically from state to state.

Risk of Serious Physical Injury. The researchers noted another factor that likely affected statistics regarding workers' compensation prescription drug costs in individual states, i.e., the percentage of industries in a state that place employees at an above average risk of serious physical injury that is more likely to require greater utilization of prescription drugs than a typical injury related to sedentary work. For example, a state in which a large percentage of people work in agriculture is more likely to have higher workers' compensation prescription drug costs than a state in which most people work in an office.

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