America has a prescription drug problem. In 2014, an estimated 576,000 Americans spent more than the median household annual income on prescription medications. Around 139,000 Americans used at least $100,000 worth of medications, almost triple the 47,000 who used that much in 2013. Overall spending on prescription drugs in the U.S. increased 13.1 percent in 2014, the biggest annual increase since 2003, and the total cost to health plans for patients in the U.S. with prescription expenses over $50,000 was $52 billion in 2014.
These staggering numbers come from the 2014 Drug Trend Report and “Super Spending: Trends in High-Cost Medication Use,” released by the pharmacy benefits management firm Express Script earlier this year.
Prescription drug expenses are one of the driving forces behind rising healthcare and workers’ compensation costs.
According to Express Script’s 2014 Workers' Compensation Drug Trend Report, workers’ compensation payers spent an average of $1,583 on prescription drugs for every injured worker in 2014, up 1.9 percent from 2013. Much of that increase can be attributed to a 35 percent increase in compounded drug prices and an 11.5 percent increase in prices for opioid painkillers. First Script, a workers’ comp care and cost management firm in Downers Grover, Illinois, notes in its 2014 Drug Trends Analysis that average prescription drug costs per claim increased 7.3 percent in 2014 over the previous year.
What’s driving these costs? Here are the three main culprits:
- Specialty drugs. Specialty drugs such as medications for cholesterol, diabetes, cancer, or depression are expensive, and 2014 saw an unprecedented 30.9 percent increase in spending on these medications and a 25.2 percent hike in prices. While only about 1 percent of all U.S. prescriptions, they represented 31.8 percent of all drug spending in 2014, up from 27.7 percent in 2013.
- Physician dispensing. In the last decade, many physicians – and even physician assistants and nurse practitioners – have started bypassing pharmacies and dispensing medications directly to patients. That means higher costs for you. According to Marsh USA’s Targeting Prescription Drugs to Decrease Workers’ Compensation Costs, drugs commonly dispensed by physicians can cost 60 percent to 300 percent more than those dispensed at retail pharmacies (source: Workers’ Compensation Research Institute).
- Compounded drugs. The practice of combining, mixing, or altering drug ingredients to create a medication tailored to an individual patient is becoming commonplace. But it’s costly and risky. Prices are almost always inflated, and compounded drugs aren’t tested and approved by the FDA. The practice increased per-user, per-year workers’ comp costs by more than 125 percent from 2012 to 2013.
Ready to rein in your workers’ compensation prescription drug costs? Follow these tips:
- Establish a trusted network of preferred physicians and other providers that will stick to your pharmacy guidelines and offer injured workers alternatives to pain medication such as counseling or physical therapy. Audit your network regularly for fraud and other issues.
- Nip physician dispensing and compounding in the bud by encouraging injured employees to use only in-network providers and pharmacies, discussing your concerns about the costs and dangers of physician dispensing and compounding with employees and physicians, and have claims staff carefully review any compounded drug prescriptions.
- Use a third-party administrator (TPA) with competent and efficient claims adjusters and nurse case managers who can provide accurate data, regularly assess your pharmacy network, and help you achieve better claims outcomes.
To learn more about controlling this costly aspect of your workers’ compensation program, talk to the business insurance experts at Heffernan Insurance Brokers.