Specialty Drugs: An Approaching Tsunami in Workers’ Compensation Costs?

Earlier this year, myMatrixx, a company specializing in pharmacy and ancillary services for workers’ compensation programs, forecast in a Webinar broadcast that drug treatment costs in these programs are poised to rise exponentially. Their projected acceleration of costs is attributed to acceleration in the development of new specialty drugs. Apparently these new drugs, which up to now have commanded only a very modest share of the marketplace, are about to muscle their way on to center stage. Over the course of an hour, panelists Phil Walls, R.Ph (myMatrixx Chief Clinical and Compliance Officer) and Jennifer Dragoun, M.D. (myMatrixx Vice President and Chief Medical Officer CompServices, Inc./AmeriHealth Casualty) brought into sharp relief the cost and efficacy of specialty drugs, and their likely use within workers’ compensation programs. They project that expenditures to date with respect to these drugs is the proverbial tip of the iceberg; their use and resultant cost is apparently about to skyrocket.

So what exactly are specialty drugs, why are they so expensive and why is their market share increasing? According to myMatrixx, while there is no official definition for these drugs, there are some generally accepted guidelines. Typically speaking, they cost more than $600 per month and treat a rare condition. They may also require special handling, use a limited distribution network or require ongoing medical monitoring. The platinum price tag is driven by such factors as research and development costs, the drug’s limited applicability (by definition, the condition being treated is “rare”) and expenditures associated with possible special handling and limited distribution networks requirements.

While these drugs currently constitute a relatively small share of the market, myMatrixx cites to studies showing that market share could climb precipitously to 50% of total drug costs by 2018 – just four years from now. The panelists point to such factors as the increased pace of development of the drugs (they estimate 40% of drugs currently in the pipeline are specialty drugs) and the fact that within the past twenty years, the number of agents in the field reportedly grew from 10 to nearly 300. They further note that in 2012 alone, the FDA approved 39 new agents, 25 of which they state could be categorized as specialty drugs. Given these numbers, administrators in the workers’ compensation field are being urged to sit up and take notice. Of course, not all specialty drugs have application to the workers’ compensation system, but myMatrixx believes that enough do treat arguably work-related injuries that the subject should certainly be on everyone’s radar.

We asked Leslie J. Hutchinson, MD, MPH, FACOEM, of HLM Consultants, for his thoughts on specialty drugs. According to Dr. Hutchinson: “Specialty drug and immunological treatments, which are currently available or about to be released into the marketplace, are the fruition of decades of pharmaceutical company research and produce results that are significantly more effective, in comparison to drugs previously available. Some of them effectively treat conditions for which there previously were no treatments. It has often been the practice of pharmaceutical companies to recover as much as possible of the research and development costs of these drugs through charging higher prices primarily in the United States, but not in most other countries. Many more highly effective new treatments with high costs will become available soon. However, pharmaceutical companies can decide (as they apparently have in some cases, like new antibiotics) changes in medicine will make production of certain agents unprofitable so that they will not produce them. Some subgroups of the population have genetic differences which make some of the most widely prescribed drugs ineffective in them so genetic screening for drug receptivity may help curb widespread expenditures that lead to little benefit. Certainly, the trends of pharmaceutical companies having more such treatments in development heading toward market release, increasing numbers of elderly people in the population with higher prevalence of disease targets for these drugs, and increasing information leading to the designation of certain diseases to particular occupational groups and settings will make these expenses a growing issue in medical management of workers’ compensation claims.”

Potential pool of workers and occupational injuries

The myMatrixx panelists suggested that the following categories of workers might be among those most likely to be candidates for treatment by specialty drugs:

> First emergency responders

> Public safety personnel

> Law enforcement personnel

> Corrections officers

> Healthcare workers

> Categories of workers included in cancer presumption laws

Additionally, they note, the workforce as a whole is aging, a trend which will likely increase treatment for various fractures and bone loss disorders.

Occupational injuries that these workers could potentially be exposed to include:

> HIV exposure, for example from needle-stick occurrences

> Hepatitis through contact through blood or other fluids

> Osteoarthritis (heavy manual labor could affect predisposed joints)

> Traumatic brain injury/spinal cord injury

> Restricted mobility following orthopedic surgery

> Cancer

The panelists discussed the following specialty drugs that have been developed to treat the foregoing workers and health conditions:

> HIV agents

> Hepatitis C agents

> Botulinum toxin (Botox®)

> Anticoagulants

> Cancer chemotherapy

Each of these areas alone has the potential to change the drug treatment calculus.

Cancer Therapy and the Impact of Cancer Presumption Laws

The predicate question for treatment payment purposes is, of course, whether the cancer presented is an occupational disease. This can be difficult to answer. For example, an ongoing debate has centered on whether firefighters face an increased occupational risk of cancer. Although numerous studies have been done on this issue, the results are not conclusive. Some studies point to a small to moderate increased risk of cancer in the digestive, prostrate and urinary systems. Others point to a more definitive link to mesothelioma. Many states (myMatrixx has identified 33) have enacted Firefighter “Cancer Presumption” laws. Although the specifics of these laws vary from state to state, they are typically a variation on the theme that if a firefighter presents with cancer, it is presumed to be occupational unless proven otherwise. Variables include the type of cancer at issue, the type of occupation (some states expand the law to first responders), whether the pre-existence of cancer has been ruled out and what the current work status of the claimant is. Assuming treatment is covered, the price tag for the prescribed specialty drugs can be high. According to the panelists, the treatment of certain lung cancers can cost approximately $1200 – 7200 per cycle for a dual drug combination therapy. This can reportedly rise to nearly $14,000 per cycle for a triple therapy combination, with a possible four to six cycles required. The panelists noted that the price tag for pleural mesothelioma is similar, with cost estimates for some drug combinations upwards of $7100 per cycle. This cost, coupled with the cancer presumption laws enacted in a majority of states, make all but certain that workers’ compensation administrators will be dealing with higher drug treatment costs for cancer.

The High Cost of Hepatitis C

Another area of potentially significant workers’ compensation exposure is the treatment of Hepatitis C. Indeed myMatrixx views this area as one of the “primary drivers” for specialty drug spending. New drugs have been developed to combat Hepatitis C, but they are making headlines as much for their cost as for their efficacy. One new therapy reputedly costs as much as $1000 per day, a significant entry in any ledger book. myMatrixx estimates that drug expenditures in this area may reach $100 billion over the next decade. However, successful treatment of the disease is also expected to rise. According to myMatrixx, early standard care treatment with a dual drug combination administered over a 48-week period, cost approximately $46,000 and had a success rate of 46%. If new specialty drugs are added to this treatment, the cost could reportedly rise to nearly $103,000, with a corresponding increase in the success rate to 72%. Proponents agree that the primary savings in this treatment is the avoidance of liver transplant surgery, which myMatrixx states could cost approximately $ 280,000. A possible cure through drug treatment within three months, even at a cost of $1000 per day could be viewed as a financial savings – not to mention the favorable quality of life intangibles that come with avoidance of surgery.

Botox® -- Not Just for Wrinkles

This neurotoxin is being increasingly used to ameliorate a variety of conditions, including those resulting from occupational exposure. myMatrixx identifies such diverse uses as the treatment of spinal cord injuries, overactive bladder (resulting from spinal cord injuries), neck pain, chronic migraines and muscle stiffness of the elbow, wrist and finger. Again, the cost is reportedly quite steep; according to the panelists, treatment of an overactive bladder could cost upwards of $1200 per injection and chronic migraines close to $1000 per injection. However, with its increasing medical applications, and its likely benefit to an aging workforce, expenditures on this treatment are predicted to rise.

Anticoagulants and Orthopedic Surgery

Another growing area of new drug development is anticoagulants. These can be important following orthopedic surgery to prevent the occurrence of deep vein thrombosis. The panelists stated that an estimated 40 – 60% of deep vein thrombosis cases are following major orthopedic surgery and prevention therapy is therefore highly recommended. New specialty drugs have been developed which are typically administered for 1 to 2 weeks after surgery. The panelists estimate the cost per day is approximately in the $40 – 50 range. With an aging workforce, these drugs are predicted to become more frequently used.

Antiretrovirals and HIV

There are a variety of new specialty drugs on the market designed to prevent HIV transmission/infection following accidental exposure. The panelists note that a drug regimen usually requires at least two and maybe three or more drug combinations depending on the severity of the exposure. Treatment typically is over a four-week period. According to the panelists, these drugs may be very toxic and a certain percentage of patients (possibly as many as 47%) may not be able to complete the course. They estimate costs of the treatment varying from approximately $900 to $2400, with the higher priced treatment reputedly better tolerated and therefore more likely to be completed by the patient.

Cost of Follow-Up Treatment

The panelists noted that some of these new specialty drugs (not just Antiretrovirals) may be complicated to administer or may have such unpleasant side effects that patients may simply stop taking them. They recommend that workers’ compensation administrators work proactively to reduce the likelihood of this happening. In other words, compliance monitoring may be necessary to ensure that the money spent on these very expensive drugs isn’t wasted – that the patient actually takes the medication as directed to obtain the desired outcome. This could take the form of developing “medication therapy management programs” that involve the patient taking an active role in their recovery by communicating with their doctor regarding any side effects, failure to take the drugs as directed or any other problems they may be experiencing with the medication.

The bottom line…

While specialty drugs may now command a small share of the market, myMatrixx predicts that their use will “explode” over the next few years as these drugs quickly amass market share. As their influence is felt across the broader market, so too will their impact on workers’ compensation programs. The panelists note that the old notion of segregating costs by hospital, doctor and drug treatment “silos” may have to change. With the confluence of such disparate threads as cancer presumption laws, an aging workforce and the occupational exposures of first responders and healthcare workers, myMatrixx forecasts the demand for these new and more effective specialty drugs to be on an upward trajectory. The prudent course of action may well be to get ahead of this coming cost tsunami by putting systems and procedures in place, ready to deal with the administration of these drugs, before the wave eventually breaks.

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