Drivers Impacting Pharmacy Spend

A sharp reversal in the overall pharmacy spend per injured worker was experienced in 2010 with a decrease of 2.3 percent, as compared to a 6.9 percent increase in 2009. This decline was made up of a variety of factors related to cost and utilization, including the effectiveness of clinical controls and mail order penetration strategies. The most important findings of the report are:

1. Average Cost per Day of Supply: Average drug cost per day of supply fell 2.0 percent from $5.03 to $4.93. The decrease was attributed primarily to three factors: The limited average wholesale price (AWP) increase in 2010, increased use of generics, and increased mail order penetration.
2. AWP Change: Average wholesale price changes represented a 3.5 percent increase in the average cost per day of supply in 2010—45 percent less than the increase in 2009.
3. Brand and Generic Mix: Generic efficiency increased to 92.6 percent in 2010 while the average cost per day of supply of a generic medication was approximately 70 percent less than a brand medication.
4. Mail Order Impact: Mail order penetration increased to 29.3 percent while the cost per day of supply through mail order was 19 percent less than through a retail pharmacy.
5. Days of Supply per Injured Worker: A 0.3 percent reduction in average days of supply was observed. This decrease in prescription utilization was related to a decrease in dosing frequency and the use of medications for shorter durations.
6. Dosing Frequency: During 2010, there was a 1.8 percent decrease in the average number of doses per day.
7. Duration of Injury: The overall duration of injury increased by 1.0 percent to 4.7 years. Despite this, prescription cost and utilization notably decreased, especially for claims older than three years.
8. Generic Dispensing and Efficiency: The generic dispensing rate increased 3.5 percent over the prior year and generic efficiency also increased 0.7 percent over 2009.
9. Duration of Injury and Impact of Generic Medications: In contrast with previous years, generic efficiency increased as claims aged, especially for those over four years old.
10. New Medication Releases: New medications released in 2010 had only a small impact on total drug spend.

Drug-Specific Trends

Consistent with previous years, over 75 percent of total drug spend was associated with medications used for the treatment of pain. Narcotic analgesics continued to lead overall spending; however, other medication classes, such as non-steroidal anti-inflammatory drugs and skeletal muscle relaxants were used earlier in the course of therapy compared to narcotics. Also of note is the increased use of dermatologics (such as Lidoderm) across all phases of the injury, especially during the early years of therapy.

Mainstream Challenges and Industry Landscape Trends

An understanding of the challenges and trends in the workers’ compensation pharmacy landscape provides a strong foundation for implementing solutions to contain costs. One should understand the impact of trends such as: repackaging and physician dispensers, the use of compounded medications, the impact of state pharmacy networks, the use of mandated formularies and utilization controls, and the impact of pharmacy cost on Medicare set-aside allocations.

Maximizing a PBM Program

In order to drive cost containment solutions that maximize the effectiveness of a pharmacy program, one should partner with a PBM that provides innovation and focus. Programs should look to increase in-network transactions through the use of injured worker-friendly materials, capture out-of-network spend with conversion programs, guide to mail order to further contain cost, ensure optimal outcomes and minimize waste with clinical programs, and enhance efficiency through technology.