August 30, 2023

Untangling Topical Drug Classes and Costs

By Healthesystems

In workers’ comp, there is a wide range of medications that patients apply directly to their skin to treat pain and other ailments. These medications, called dermatologicals, are used when an alternative to the oral delivery of medications is appropriate. They represent a significant and growing portion of workers’ comp drug spend, in large part due to greater dispensing of high-priced drug products, often at physicians’ offices or via mail-order pharmacies.

Dermatological agents are now the number two drug group by spend in workers’ comp, according to the Workers’ Compensation Research Institute. WCRI data shows they make up 20% of drug payments, with payments per claim ranging from $10 to $312.

Dermatologicals is a large drug class represented by diverse therapies, all with different prescribed treatments, dispensing methods, safety, effectiveness, and costs. In many cases, dermatologicals may be clinically appropriate and cost effective – but some products prescribed in workers’ comp present concerns for both their therapeutic appropriateness and cost.

Let’s look at the different types of topical medications and their cost and efficacy considerations in workers’ comp.

Non-Analgesic Dermatologicals vs. Topical Analgesics

Non-analgesic dermatologicals utilized within workers’ comp may include medications for:

  • Contact dermatitis
  • Burns
  • Autoimmune disorders such as psoriasis
  • Skin disorders tied to chemical irritation
  • Lacerations

Topical analgesics are dermatologicals that specifically treat pain. They can be an appropriate alternative as the workers’ compensation industry shifts away from the use of addictive opioid analgesics for chronic pain. Drug classes within this category include:

  • NSAIDs
  • Muscle relaxants
  • Capsaicin
  • Menthol
  • Methyl salicylate
  • Camphor
  • Lidocaine

Over the Counter vs. Prescription Medications

Dermatologicals are available over the counter (OTC) as well as via prescription. Prescription medications make up the bulk of topical analgesic spend – 59% – according to WCRI, while OTC medications make up just 1%. In some states, 50% to 70% of topical analgesics are physician dispensed.

Lidocaine/menthol is a low-volume, high-cost topical analgesic to watch for in workers’ comp claims. According to the California Workers’ Compensation Institute, it represented only 1% of the dermatologicals dispensed in 2021, but at an average of $1,050 per prescription, it accounted for 6.2% of the dermatological payments.

Drugs to Watch: Compounds and Private Label Topicals

Topical analgesics are also available as compounds, which are specifically mixed for the patient, and private label topicals (PLTs), which are independently manufactured – both of which present cost and clinical concerns.

PLTs make up 32% of topical analgesic spend. They are often marketed by manufacturers as having unique formulations and special ingredient blends. But most of these products contain ingredients that can be found in inexpensive, widely accessible OTC topical products.

Compounds make up 9% of topical analgesic spend. They combine two or more drugs to create a medication tailored to the needs of 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. This can lead to serious patient injury or death, according to the U.S. Food & Drug Administration.

Both compounds and PLTs are concerning because they are not FDA approved and there are no controlled clinical trials to support their clinical efficacy. They are also far more expensive than OTC or prescription drugs. Average wholesale prices for PLTs often exceed $500, according to Healthesystems data, while comparable OTC products retail for $10 or less. Meanwhile, Risk & Insurance lists compound creams as one of six drugs that should raise red flags in workers’ comp claims.

In the event a PLT or compound is prescribed, Healthesystems recommends that proof of medical necessity will go a long way in discerning if the prescription is appropriate. There are few proven clinical benefits to prescribing PLTs or compounds. Therefore, FDA-approved or OTC products should be used whenever possible.

For more information of dermatologicals, see our recent infographic in RxInformer magazine.

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