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NCCI’s latest pharmacy report – the highlights

The good folks at NCCI just published a new study of prescription drugs in workers’ comp; here are a few highlights; the data is from 2011.

  • Narcotic usage increased significantly, from 21% of costs in 2010 to 25% in 2011.
  • Physician dispensing increased as well, along with the average cost for physician dispensed drugs.
  • NCCI estimates drugs account for 18% of all medical expenses; note that this is based on total incurred cost, or for the layperson, their estimate of what the total including already-paid and future drug costs.
  • The older the claim, the greater the percentage of total medical costs due to drugs – up to 40 percent.
  • On a cost per claim basis, NCCI indicates drug costs increased six percent in 2011.
  • Generics account for 76 percent of the scripts, but only 44 percent of the cost.

So, what does this all mean?

Couple things stand out.

First, NCCI’s numbers are based on total incurred, therefore there’s a bit of forecasting involved. I note this as the 18% figure (drug costs as a percentage of total medical spend) is significantly higher than most payers I work with; the range is around 12% – 14%.

Second, drug spend declined in 2011 according to CompPharma’s annual Survey of Prescription Drugs in Workers’ Comp.

Why the difference (NCCI indicates a 6 percent increase)?

  1. CompPharma looks at total, not per-claim cost, so claim frequency has some impact.
  2. NCCI uses incurred (there it is again), the Survey is based on actual paid amounts.
  3. CompPharma is a survey of 23 payers, all of which use PBMs.  These are generally fairly-to-very sophisticated payers.  In contrast, NCCI’s data comes from a much broader spectrum of payers, some of which don’t use PBMs, and others don’t use them effectively.

What does this mean for you?

Drug cost increases are moderating, but physician dispensing remains a big problem, and opioid usage increased almost 20% (four points) year over year.

That’s really bad.

2 thoughts on “NCCI’s latest pharmacy report – the highlights”

  1. Most Workers Comp systems use network doctors that are chosen by the insurance carrier. Last time I checked, narcotics can only be dispensed with a prescription. So the insurance carriers are at fault for choosing doctors who over prescribe narcotics.

    1. Jeff – thanks for the comment. Unfortunately, while some states’ employer direction regs/laws do allow employer direction, many are quite limited, e.g. GA, IL, NY or require broad networks of many providers. Many states, such as MO, do not allow direction.
      That said, there’s no question insurers and employers do need to be much more rigorous about monitoring their networks, and states must allow employers to deny providers’ access to those networks as well. Unfortunately the latter issue is a major problem especially in states such as CA.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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