California Workers’ Compensation Drug Costs Up, Despite Reforms

Despite the adoption of California workers’ compensation medical reforms in 2004, a new study finds that both the average number of prescriptions and average prescription drug payments per claim are on the rise — increases that coincide with the growing use and soaring cost of “brand” drugs and highly addictive “schedule II” medications, including opioid painkillers.

The California Workers’ Compensation Institute study is based on data from 1.1 million job injury claims between January 2002 and June 2008.

The results show that California workers’ compensation prescription drug utilization and reimbursement are growing, despite reforms adopted in 2004 that were intended to keep costs down, the institute said.

Comparing first-year prescriptions and pharmaceutical payments across six years, the study found that prior to reform, the average number of prescriptions per claim rose 15% from 3.3 in 2002 to 3.8 in 2004. In contrast, total prescription payments per claim rose just 9% from $269.05 to $293.41, indicating a shift toward less expensive generic drugs. Average payments for generics fell nearly 10% , while average payments for brand drugs rose 8%.

After the reforms, utilization continued to grow, increasing from 4.0 prescriptions per claim in 2005 to 5.0 in 2007 (up 25 percent). Meanwhile, total payments per claim for first-year prescriptions declined almost 8% between 2005 and 2006, spurred by a 31% drop in the average amount paid per generic prescription, which fell from nearly $74 to just over $51, while the average paid for brand medications continued to rise, increasing 14% to more than $141 per prescription. Total first-year prescription payments per claim headed back up in 2007, however, as utilization continued to rise while the average amount paid for generics climbed 12% to $57.33, and the average reimbursement for brand drugs rose 15%.

Overall, for the post-reform period of 2005-2007, the average number of first year prescriptions per claim was up 25% while first-year prescription drug payments per claim rose 35.6%, the study found.

The study also found a huge increase in the use of painkillers and short-acting barbiturates. In 2002, prescriptions for “schedule II” drugs represented just 0.4 percent of prescriptions in workers’ compensation. By the third quarter of 2008, those drugs were 6% of prescriptions.