Workers’ comp pharmacy costs, as a percentage of total medical costs, have steadily decreased over the past several years – as have drug costs per claim. According to 2022 data, prescription drugs now make up 7 percent of workers’ compensation medical costs.1
Despite that, there is still a sizable opportunity to contain costs. In fact, a Healthesystems survey of workers’ comp stakeholders shows that containing costs is the top pharmacy program goal for 57 percent of respondents, making it their #1 pharmacy program goal overall. Additionally, medical price inflation, including pharmacy price inflation, remains a challenge for 44 percent of stakeholders.2
This focus on pharmacy costs may be spurred by increases in utilization and cost for specific drugs, including some that come with high price tags and sometimes questionable clinical benefits. These high-impact drugs – which include dermatologicals/topicals, compounds, and more – are a mix of long-standing classes and more emerging trends. While they each represent proportionately low utilization compared to opioids or NSAIDs, their high prices can increase the cost of individual claims exponentially.
AWP stands for Average Wholesale Price. It is a pharmaceutical term that describes the average price paid by a retailer to buy a drug from the wholesaler.3 The AWP has often been equated with the “sticker price” or “list price” of a drug.
However, because it is derived from self-reported manufacturer data and is not a government-regulated figure, the AWP is not necessarily an accurate reflection of actual market prices.4
Dermatological agents are medications that are applied topically, directly on the area to be treated, and include creams, gels, and ointments. In some cases, these medications can be both prescription and over the counter (OTC), such as topical lidocaine and diclofenac. In workers’ comp, non-analgesic topicals are prescribed for contact dermatitis, burns, autoimmune disorders, skin disorders tied to chemical irritation, and lacerations. This drug class also includes topical analgesics, which specifically treat pain.
Dermatological agents are being increasingly prescribed in workers’ comp and now represent a leader in spend, accounting for 22 percent of total prescription payments in 2023Q1.5 In fact, topical costs per workers’ comp claim grew an astronomical 96 percent from 2012 to 2023.6
This increase may be in part due to the rise of Private-Label Topicals (PLTs), independently manufactured pain creams that share many of the same ingredients as OTC products available on the shelf at retail stores but come with a significant price markup. As of 2021, PLTs were the second most frequently prescribed topical analgesics in workers’ comp, accounting for 16 percent of prescriptions but a higher share of payments (32 percent) – likely due to higher prices paid per prescription.7
AWPs for PLTs often exceed $500, while comparable OTC products retail for $10 or less.8 An example is the PLT trolamine salicylate 10%, which has an average price paid per prescription of $591, while the price paid for the equivalent OTC product was 66 times lower.9
According to the Journal of the American Academy of Dermatology, AWPs for topicals have been steadily increasing over time. Between 2005 and 2016, the AWP of topical generic medications increased by 273 percent and the AWP of topical branded medications increased by 379 percent. The topical generic with the greatest price change increased by 2,529 percent.10
Topical analgesics are also available as compounds, which are specifically mixed for the patient. Compounding can be dangerous if it is done poorly because it can result in contamination or a drug that contains too much active ingredient. Even when done correctly, compounding comes with risks, such as potential therapeutic duplication with other medications as well as concerns with quality assurance and shelf stability.
Both compounded topicals and PLTs have not undergone controlled studies to support their clinical efficacy or safety and have not been approved by the U.S. Food and Drug Administration (FDA). They are also not recommended by evidence-based guidelines such as the Official Disability Guidelines (ODG).
From a safety standpoint, a National Academies of Sciences, Engineering, and Medicine study determined that, when used appropriately, there is little conclusive data to support a high risk of safety concerns for any of the 20 studied ingredients in topical compounded pain creams beyond local skin irritation. However, the study also concluded that “high levels of systemic absorption can have potentially life-threatening consequences particularly for preparations including ketamine [a dissociative anesthetic], clonidine [a blood pressure drug], and bupivacaine [a local anesthetic].”11
There are few proven clinical benefits to prescribing PLTs or compounded topicals. In the event a PLT or compound is prescribed, claims staff should not approve these products. Instead, they should recommend that the prescriber consider comparable OTC products or FDA-approved prescription products when necessary. They may also ask for documentation of medical necessity to discern if the prescription is appropriate.
Physician dispensing is one factor driving up prices in the dermatological drug class. This is the practice of doctors supplying prescription medications directly to injured workers. Sometimes these medications are dispensed at a much higher cost than the same drug would be provided at a retail pharmacy.
Physician-dispensed drugs have been shown to cost as much as 60-300 percent more for workers’ comp patients.12 According to a 2021 study, almost all workers who received PLTs received them from physicians’ offices. And in some states, 50-70 percent of topical analgesics are physician dispensed.13
OTC DRUGS
Menthol 4% gel (Biofreeze®, Polar Frost®)
Menthol/methyl salicylate cream (Muscle Rub®)
Camphor-menthol-capsaicin 80-24-16 mg patch (Tiger Balm®)
Capsaicin 0.025% cream (Salonpas Hot®)
Diclofenac sodium 1% gel (Voltaren®)
Lidocaine 4% or less cream (Aspercreme®)
PRESCRIPTION MEDICATIONS
Lidocaine 5% patch (Lidoderm®)
Lidocaine 5% ointment
Diclofenac sodium 1.5% solution (Pennsaid®)
Diclofenac sodium 3% gel (Solaraze®)
PRIVATE-LABEL TOPICALS
Lidocaine-capsaicin-menthol-methyl salicylate 4-0.0325-10-27.5% ointment (LidoPro™)
Lidocaine-menthol 4-4% patch (Terocin®)
Lidocaine-menthol 4-1% patch (LidozenPatch®)
Lidocaine-menthol 4.5-5% patch (Lidothol®)
Lidocaine 1.8% patch (ZTlido®)
Compounds are custom products created by combining, mixing, or altering ingredients to create a medication tailored to the needs of an individual patient. Compounding combines one or more active and one or more inactive ingredients into nonsterile products such as creams or sterile products such as injectables. Most compounds seen in workers’ compensation are topical creams/gels.
Compound kits are kits that contain two or more pre-measured drug ingredients that are meant to be combined immediately prior to use. An example is Ibuprofen 10% cream (EnovaRX ®).
Note that in some cases, compounds can serve an important patient need. Examples include a patient who has an allergy to a certain dye and needs a medication to be made without it, or an elderly patient who cannot swallow a tablet and needs a medicine in a liquid dosage form.14
Compounds accounted for a small percentage of prescription payments – less than 2 percent in 23 of 28 study states – in 2023Q1. However, the payment share for compounds rose to 11 percent in New Mexico, likely because compounds have higher-than-typical payments per prescription.15
According to one study of a commercially insured population, the average ingredient cost for compounded medication prescriptions was $710.36, which is 130 percent higher than for non-compounded medication prescriptions.16 Another source notes the price of some compounds can be tens or even hundreds of times more expensive than similar prescriptions or OTC products.17
Compounds are not FDA-approved formulations. That means the FDA has not studied that specific combination of ingredients to determine they are safe or effective. According to the FDA, poor compounding practices can result in serious drug quality problems, such as contamination or a drug that contains too much active ingredient. This can lead to serious patient injury and death.18
As mentioned above, compounding also comes with other concerns, such as high ingredient concentrations, possible therapeutic duplication, quality assurance control, and questionable shelf stability.
As far as efficacy, an Annals of Internal Medicine study found no statistically significant differences in pain reduction between patients using a compounded topical versus patients using a placebo, indicating that the compounded version offered no clinical benefit.19
If a compound medication is determined to be appropriate, a review of the ingredients may be warranted to prevent any duplications with a patient’s other medications. These duplications can increase the risk of side effects or adverse reactions
CUSTOM COMPOUNDS
Gabapentin, flurbiprofen, ketamine HCL, cyclobenzaprine HCL, bupivacaine HCL, and cream base
Flurbiprofen, cyclobenzaprine HCL, baclofen, lidocaine HCL, and cream base
COMPOUND KITS
Flurbiprofen-cyclobenzaprine cream (VP® FC Cream Kit)
Ibuprofen 10% cream (EnovaRX®)
Ketoprofen-lidocaine NCL-gabapentin 20-2-10% cream (VP® GKL Cream Kit)
Specialty drugs are those that are used to treat rare and/or complex conditions and may have special storage and handling requirements. This class includes oral medications as well as infusibles and injectables, which are administered to patients through a needle or catheter.
In workers’ comp, commonly prescribed specialty drugs include antivirals and antiretrovirals, oncology agents, and prophylactic agents, which are administered to prevent and treat HIV, Hepatitis C, and other infections in the event of workplace exposure to these viruses, such as needle-stick injury.
As with compounds, utilization of these drugs is relatively low in workers’ comp, but costs are high. These therapies can cost up to 40 times more than traditional medications, dramatically impacting the cost of individual workers’ comp claims.20
And for some drugs, these costs are increasing. For example, according to Healthesystems data, costs for Isentress® (raltegravir), an HIV therapy, have risen despite decreases in utilization. There have also been increases in scripts among specialty therapies for multiple types of cancers, asthma, and osteoporosis, contributing to increased specialty spend.
Unlike some of the other drug classes we’ve covered, specialty medications do have evidence to support their safety and efficacy. For many conditions, there are no other first-line treatments. From a safety standpoint, specialty drugs require in-depth patient counseling and clinical monitoring. It is also important to ensure patients are adherent to these high-cost medications.
The definition of what constitutes a specialty drug varies, but some of the more common examples in workers’ compensation include:
Migraine agents are seeing more utilization in workers’ comp to treat migraines exacerbated by workplace injuries. In 2019, the FDA approved several novel migraine treatments within a new class called calcitonin gene-related peptide (CGRP)-targeted agents. These medications are designed to target CGRP, a protein which causes intense inflammation in coverings of the brain when released.
In 2023 Q1, migraine medications accounted for 7-15 percent of prescription payments in the top quartile of states. And between 2021 Q1 and 2023 Q1, per-claim payments for migraine medications increased in 23 of 28 states studied.21
By all accounts, novel migraine agents are expensive. The first FDA-approved CGRP inhibitor drug, Aimovig® (erenumab), was released in 2018 with a list price of $6,900 per year.22 According to other sources, the costs of the new migraine drugs can be considered “high in principle when compared with [standard of care]”23 and “considerably higher than generic triptans and most other migraine therapies.”24
Novel migraine agents have favorable safety profiles and are efficacious in the prevention of migraines. According to the American Headache Society, the cumulative evidence for their efficacy, safety, and tolerability is “significantly greater than that for any established migraine preventive therapy.”25
Though they are expensive, novel migraine agents are now considered first-line treatments for migraine preventative therapy. However, other more cost-effective medications, such as beta blockers and topiramate, may be considered based on individual patient factors and clinical features.
Erenumab-aooe (Aimovig®)
Fremanezumab-vfrm (Ajovy®)
Galcanezumab-gnlm (Emgality®)
Lasmiditan (Reyvow®)
Eptinezumab-jjmr (Vypeti®)
Atogepant (Qulipta®)
Rimegepant (Nurtec® ODT)
Ubrogepant (Ubrelvy®)
Zavegepant (Zavzpret™)
As we see more of these high-cost drug classes in workers’ comp, payers are looking for ways to proactively keep costs down. Here are four strategies to help contain pharmacy costs:
