Controlling the high cost of prescription drugs

August 24th, 2004 by Julie Ferguson

Industry trends point to a consistent decline in claims frequency, but a disturbing trend towards increased severity. In other words, the number of claims is trending down, but the cost of claims is trending up. Part of this is due to skyrocketing medical costs. Claims costs include both wage replacement and medical benefits. Historically, wage replacement has represented the larger share of the claims dollar, but recently, medical benefits has edged ahead as the leading cost. No surprise – health care has been rising at or near double-digit rates for a few years now.

Prescription drugs are an increasingly larger piece of the medical pie for workers compensation costs. According to Joseph Paduda of Health Strategy Associates, the costs for prescription drugs associated with workers compensation claims total approximately $2.5 billion a year, and are increasing at an annual rate of 13 to 17 percent. Despite this hefty price tag, it is interesting to note that workers comp expenditures represent less than 2% of the nation’s total drug costs, a fact that has significance in terms of the potential arsenal of cost-control strategies.

Joe discusses some of the reasons for this trend in an essay, Why Can’t We Control Drug Expenses?

Earlier this year, he also released the findings of a Comprehensive Prescription Drug Management Survey that Health Strategy Associates conducted among decision-makers at 21 of the largest workers compensation payer organizations to assess their perceptions, opinions, and attitudes about prescription drug cost management in workers compensation. Respondents cited Pharmacy Benefit Management (PBM) programs as a key tool for controlling costs. Next to PBMS, the most frequent cost control strategy cited was the treating physician:

Five respondents cited a desire to influence the treating physician, and four others specifically cited the ability of a “payer-side” pharmacist or physician to intervene with a treating physician, thereby influencing a specific prescription or the treating physician

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