Work comp pharmacy – it’s getting complicated

That’s the one-word takeaway from a read of Healthcare Solutions latest Drug Trends report.

A decade ago work comp pharmacy was driven overwhelmingly by utilization; ever-increasing volumes of pills prescribed and dispensed to claimants was the primary cost driver.

Now, price and drug mix have become the main concern.

Healthcare Solutions reported drug price inflation rate exceeded 8.6%; 12.4% for brands and 7.9% for generics. Overall, drug costs were up about 4%, indicating efforts to control the type and volume of drugs counterbalanced a good chunk of the industry’s price increase.

In particular, utilization decreased by 3.1%, a result that would have been unthinkable just a few years ago.

In part that was driven by a 1.4% drop in utilization of opioids, led in turn by a 2.1% decrease in usage of hydrocodone/acetaminophen, the most commonly-used opioid.

For those not steeped in the details of drug pricing and work comp, it’s important to understand that what work comp pays is based in large part on prices set by drug manufacturers; these manufacturers do NOT have prices specific to workers’ comp. Essentially all states with fee schedules for work comp drugs base those fee schedules on AWP (which is set by the manufacturer). And, PBMs’ contracts with pharmacies are based to a large extent on AWP; MAC (maximum allowable cost) is also used extensively for some generics)

A great example of price’s impact is the recent introduction of several wildly expensive Hepatitis C drugs; according to HCS, these drugs, “while not common in workers’ compensation, can be significant to a client’s overall drug spend if they do have a claim.  This is especially troublesome for healthcare clients [e.g. hospitals, emergency services].  Treatment can be upwards of $100,000.”

Another notable cost driver was the higher volume and prices for compound drugs; this is consistent with other payers’ experience.

I’d note that Healthcare Solutions’ clinical programs are quite good; I’ve audited those programs twice in the last few years and both the programs and results are excellent.

What does this mean for you?

Managing drug usage requires a lot more expertise, analysis, and intelligence than it used to.  It also requires payors listen to and work closely with their PBM.

One thought on “Work comp pharmacy – it’s getting complicated

  1. According to CMS’ Office of the Actuary, we can expect more of the same over the next several years. The National Healthcare Expenditures Report – projected prescription drug spend growth of 6.8% for 2014 and a steady 6% through 2022, driven primarily by the rising trend of expensive specialty drugs and changes in clinical guidelines that encourage drug therapies earlier in treatment.

    Yes, pharmacy cost controls will be much more about clinical program management!

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