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Doctors Prescription Proliferation Hikes Workers Compensation Cost

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A surge in prescription activity by doctors is having a greater impact on the cost of treating injured workers than the price of drugs, according to new research from the National Council On Compensation Insurance.

The findings were made in the report “Prescription Drugs: Comparison of Drug Costs and Patterns of Use in Workers Compensation and Group Health Plans.”

Among the other key findings were figures showing that workers compensation systems paid roughly 125% of the average wholesale price of prescription drugs, while group health operations paid 72%.

The report also said that the prescription drug share of workers comp medical costs rose from 6.5% in 1997 to 9.6% in 2001, using the year the accident occurred.

It was noted that if the yearly cost for a fixed regimen of medical treatment begins at $10,000 and there is annual medical cost inflation of 10%, then the cost for these medical treatment services will be nearly double by the eighth year after the accident.

Generic equivalent drugs, the report said, are prescribed, when available, 79% of the time for workers compensation claims.

Barry Llewellyn, NCCI senior divisional executive for regulatory services, based in Hoboken, N.J., and one of the reports authors, says he was surprised by the fact that generics were that widely prescribed. “Frankly, thats been one of the leading attempts to control costs. Apparently its happening.”

Llewellyn at the same time notes the high rate of prescriptions for the aggressively promoted nongeneric pain killer Oxycontin, which he says normally is reserved for only the most severe cases of pain such as the last stages of cancer.

The researchers found that 56 percent of comp drug costs are associated with drugs having no generic equivalent. So savings from generics are available for only about 8% of workers comp drug costs overall.

Painkillers, according to the report, represent 55% of the cost of workers comp prescriptions.

Explaining drug utilization, which the report says has a greater impact on comp drug costs than price, researchers say it includes “movement to new or more powerful drugs and an increase in the number of prescriptions.”

Factors that were found to increase utilization include:

Greater availability and dependence on medications for treatments.

Aggressive marketingmajor pharmaceutical manufacturers spend more than twice as much on marketing and administration than on research and development, says NCCI. Drug promotions reached nearly $19.1 billion in 2001, the report says.

The aging workforce, which requires greater support from prescription drugs.

Increased access through insurance coverage.

According to NCCI estimates, if generic drugs were prescribed 100% of the time when they could be substituted for brand name drugs, there would be an 8% savings for the workers comp system.

After painkillers, accounting for 55% of comp drug costs, the study found that muscle relaxant drugs were responsible for 20% of the prescription costs for workers comp and antidepressants for 14%.

Half of the top 10 prescribed drugs have no generic alternative. (See chart.)

Heavily promoted Celebrex and Vioxx in 2000 accounted for almost 10% of the growth in prescription drug sales, it was noted.

The report discusses using pharmaceutical benefits managers to control the kind of drugs prescribed and using negotiation to control costs.

It says that most pharmaceutical benefits managers do not have workers compensation-specific contracts and suggests that “pharmacies may be reluctant to surrender the current profits reaped from workers comp prescriptions. In addition, price discounts do not necessarily translate into cost reductions, since there is little control over the level of average wholesale price.”

The report says that a number of state legislatures have considered legislation to establish pharmacy fee schedules, which it says can be part of an effective cost containment strategy addressing unit prices of prescription drugs.

In 2001, 23 states were found to have had workers compensation fee schedules for prescription drug payments.

The researchers say that while establishing fee schedules is important, setting the appropriate fee levels is probably the most critical aspect. NCCI says setting fees too high will unnecessarily increase costs and setting fees too low may result in restricted access or increased utilization.

Linking fee levels to average wholesale price may result in illusory savings, “as average wholesale price is uncontrolled and subject to significant upward pricing pressures (much like the sticker prices on automobiles),” the report says.

Examining legislation mandating the use of generic drugs where appropriate, NCCI says that “not only would direct cost savings be achieved through legislating the increased use of generics but also the expense that many states incur by offering incentives, such as higher dispensing fees and/or percent of average wholesale price paid to encourage pharmacists to dispense generic drugs would be eliminated.”

However, NCCI notes that generics already are widely prescribed in the comp system so the savings would be small.

Llewellyn co-authored the study with Jeanne Emond, with contributions from Barry Lipton, Chris Poteet and Jim Stevens. The full study is available at the NCCI Web site:

is an associate editor of NUs Property & Casualty magazine.

Reproduced from National Underwriter Life & Health/Financial Services Edition, September 19, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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