HSA survey reveals drug cost inflation in workers’ compensation is up by 7.5%

Drug cost inflation in workers’ compensation is up 7.5 percent according to Health Strategy Associates’ (HSA) Sixth Annual Survey of Prescription Drug Management in Workers’ Compensation.

This increase came after five years of progressively lower drug cost inflation rates documented in HSA’s previous surveys. Workers’ compensation payers said the primary cost driver was utilization, citing such specific issues as the over-use of pain medications and physician prescribing patterns. To combat inflation, payers are increasing investments in analytics and moving towards step therapy and stronger clinical management of pharmacy.

“Payers are also calling on their Pharmacy Benefit Management (PBM) firms for deeper insight into pharmacy trends, better management of claimants with chronic pain issues, and stronger first-fill capture programs,” said Paduda.

Other concerns cited were per-unit cost increases, the predominance of single-source brands, and OxyContin rebranding. Physician dispensing continued to be an issue for payers with significant business in California and the southeastern United States, especially Florida.

Some respondents saw significant decreases in their drug costs with four participants reporting drops of nine percent or more from their 2007 costs. Unlike previous years, drug cost inflation trended lower at smaller payers than their larger competitors. “Smaller payers seem to be ‘faster to market’ with utilization controls, adjuster education and data sharing with their PBM partners,” Paduda noted.

For the fourth consecutive year, the survey was sponsored by Cypress Care, (www.cypresscare.com) a full-service national workers’ compensation PBM, and its successor organization, Healthcare Solutions, Inc. Decision makers and operations staff from eighteen carriers and TPAs, participated. Respondents’ 2008 drug expenses ranged from $1.2 million each to $148 million; respondents’ cumulative drug spend totaled $810 million, 19.3. percent of the total workers’ compensation drug spend.

Source: Health Strategy Associates