We're sorry but your browser is not supported by Marsh.com

For the best experience, please upgrade to a supported browser:


Risk in Context

Five Strategies for Reining in Workers’ Compensation Prescription Drug Costs

Posted by Christine Williams February 20, 2015

Workers’ compensation prescription drug costs have been a challenge for many employers in recent years. Although there are several factors behind the increase, two increasingly common practices have had a profound effect on these expenses:

  • Physician dispensing: The practice of physicians providing medication directly to patients jumped from 6% of total workers’ compensation drug costs in 2003 to 17% in 2011, according to the National Council on Compensation Insurance.
  • Compounded drugs: Meeting specific patient needs with unique medications — rather than with commercially available alternatives — increased on a per-user, per-year cost basis in workers’ compensation by more than 125% from 2012 to 2013, according to Express Scripts.

In a recent webcast sponsored by Marsh’s Workers’ Compensation Center of Excellence, a panel of experts from Marsh, Mercer, Express Scripts, and Comcast/NBCUniversal explored how these trends are affecting workers’ compensation programs and the strategies that you can use to better control your organization’s prescription drug costs. Among other steps, you should consider the following:

  1. Tighten up your network and audit it regularly. Establish a network of preferred doctors and other providers that you trust to adhere to your pharmacy guidelines, including those related to physician dispensing. Encourage physicians to offer injured workers alternatives to pain medication, such as counseling and physical therapy. Your pharmacy benefit manager (PBM) should also audit your network at least quarterly and take action to eliminate fraudulent or problematic behavior.
  2. Seek to limit physician dispensing from the beginning. Many of the costs related to physician dispensing can stem from an injured worker’s first visit to an emergency room, local clinic, or personal physician. Environmental, health, and safety professionals, human resources personnel, and supervisors and managers should encourage injured workers to use in-network providers and pharmacies only. You can also encourage the use of in-network pharmacies by giving an injured worker a first-fill form or card.
  3. Communicate with doctors and employees about the costs and dangers of physician dispensing and compounding. If compounding medication is prescribed to an employee, your PBM should contact the employee or prescribing physician about the high cost and potential dangers. In the case of physician dispensing, PBMs may have more success communicating directly with employees, as doctors can profit significantly from dispensing medication directly.
  4. Establish prior authorizations for compounded drugs. A team of nurses or other well-trained claims management staff should review compounded drug prescriptions to ensure that there’s a legitimate medical purpose for the injured employee to use the compounded drug before it is dispensed.
  5. Work with your third-party administrator (TPA) to drive better claims outcomes. Variable costs can make up as much as 90% of your total workers’ compensation program cost, so it’s important to focus on outcomes rather than the fixed price you’re paying upfront. Make sure that you’ve selected a TPA with competent and efficient claims adjusters and nurse case managers. Your TPA should also provide you with high quality and accurate data about your program, including regular assessments of your pharmacy network performance via your PBM.

For more on this topic, listen to the replay of Workers’ Compensation 2015: Reining in Prescription Drug Costs.

Related to:  Workers' Compensation

Christine Williams