Summary: Rising prescription drug costs can affect workers’ compensation claims, as these types of medications account for 14% of claim costs. Find out what workers’ compensation carriers and employers can do to help manage the ever-increasing costs of prescription drugs.
Why Are Prescription Drug Costs Rising?
Ringing in the New Year didn’t just bring a slew of resolutions to lead a healthier lifestyle. The start of 2022 also saw another increase in the cost of prescription drugs, many of which individuals utilize to manage chronic conditions like diabetes or fibromyalgia. It’s reported that drug manufacturers raised the prices on 460 different medications
an average of 5% at the beginning of January, although some increases were much higher.
Prescription drug prices often increase at the beginning of the year, and then they rise again in June. Pharmaceutical companies say that prescription drug costs are increased to help offset the costs of investing in researching and creating new medications. However, approximately
25% of Americans find it difficult to afford prescription drugs due to high out-of-pocket costs.
The Health and Economic Impact of Rising Costs of Prescription Drugs
The cost of prescription drugs has been steadily increasing since 2016, outpacing inflation. In fact, the U.S. House of Representatives
Drug Pricing Investigation found that between 2016 and 2020, pharmaceutical companies raised the price of many branded prescription drugs by 36%, which was almost four times the rate of inflation. One analysis found that between 2018 and 2019,
50% of all Medicare Part D-covered drugs had list prices that surpassed the rate of inflation. These included many commonly used, name-brand medications for cancer, diabetes, mental/mood disorders and many others.
Prescription drugs represent
10% of national health spending and nearly 20% of health benefit costs for large employers and Medicare. The high prices of prescription drugs are a concern not only for public and private payers, but also for many individuals throughout the country. Often, many adults find they are not able to take their medications as prescribed due to not being able to afford them.
How do Rising Prescription Drug Costs Impact Workers’ Compensation Claims?
The rising costs of prescription drugs are causing investigations from federal and state legislatures, and policymakers are being urged to address the issue as well. The Drug Pricing Investigation mentioned above found that 12 of the most expensive prescription drugs were priced an average 500% higher than when they were first introduced to the market.
Workers’ compensation covers all the costs associated with prescription drugs after an employee suffers an injury or illness on the job. Prescription drugs make up a significant share of workers’ comp costs, accounting for approximately
14% of a workers’ compensation claim. The cost of a prescription drug is directly related to the actual price of the medication and its utilization, which refers to how much of the drug is used within a population, how many individuals use it and how long it’s being used.
However, the National Council on Compensation Insurance (NCCI) recently found that while prices for medications continue to rise,
utilization has been on the decline. This means that although prices keep increasing year after year, the cost per workers’ compensation claim has decreased due to lower usage. Additionally, medical professionals continue to look into
safer treatment alternatives to opioids to help combat the opioid crisis that has swept the nation in recent years.
How Workers’ Compensation Carriers Can Manage Increasing Prescription Drug Costs
Employers and insurance carriers must work to balance the rising cost of prescription drugs with continuing to provide high-quality care for the injured worker. While medications will always play an important role in patient recovery, it’s also important to avoid over-utilization that could lead to further health complications – and higher costs to the company.
Some insurance carriers employ pharmacists to ensure injured employees receive the right medications and treatment plans that lead to the best outcome and recovery. AmTrust’s Melissa Burke, VP and Head of Managed Care and Clinical, says, “Since 2019, AmTrust has been investing in our clinical resources, including nurses, physicians and pharmacists. A unique fact about AmTrust is we have three PharmDs in leadership roles at our company. Although we take a holistic approach to all treatment, we know optimal medication management can greatly impact injury recovery and wellness. My background is hospital management and Nimish Patel, our director of medical cost containment, has an analytics background. Our clinical product manager, Mina Nakhla, with a physician dispensing group before joining us. Bringing our three areas of expertise together allows us to manage pharmacy from a clinical, analytical and regulatory perspective delivering industry-leading results.”
Using a pharmacy benefits management program is one option to help control the costs of prescription drugs. These programs offer a middle man between the workers’ compensation carrier and the employer, injured employee and pharmacy. The pharmacy manager can negotiate prices, control claims costs by recommending generic versions of name-brand medications when possible, help reduce drug abuse, and ensure the employee is recovering efficiently, effectively and returning to work as soon as they are medically able.
Another focus for workers’ compensation carriers and employers is looking at
behavioral health practices following a workplace injury. AmTrust has been an advocate for holistic care and pain management in recent years, investing in behavioral health services and options such as
telehealth, psychiatry and cognitive behavioral therapy. These services help provide the injured worker with a more personalized treatment plan to aid in their recovery.
Burke recently told
Insurance Business Magazine, “We’ve slowly seen that the more you personalize the care and pain management approach, the better the return-to-work scenario, the more optimal the situation, and the less likely employees are to fall back out of work. So, we can decrease recidivism with that holistic care and wellbeing approach.”
Behavioral health services can help significantly reduce the severity of a workers’ comp claim, as well as mitigate fear about returning to the workplace or using medications in their recovery.
AmCares® is a predictive nurse assignment model AmTrust uses to proactively partner a registered nurse with an injured employee to ensure the right level of care is provided as soon as possible. The program has seen increased employee satisfaction and network utilization, leading to a reduction in medical costs, lost time from work, unnecessary emergency room visits and lag time. Burke continues, “…We’ve in-sourced our nurses and we’re building our nurse team for telephonic nurse case management, utilization review, and pharmacy. Those three pieces together enable us to take that holistic approach, ensuring we provide the right medications and the right treatments for that whole-body approach to wellness and mental health.”
Workers’ Compensation Coverage from AmTrust Financial
AmTrust Financial is a leader in
workers’ compensation insurance for small to mid-sized businesses. We love working closely with our agents and small business owners to design the right coverages for their specific needs. Our
Loss Control Department specializes in loss prevention and risk management plans that improve employee safety. For more information about our
small business insurance solutions, please
contact us today.
This material is for informational purposes only and is not legal or business advice. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages may vary by location. Contact your local RSM for more information.