Prescription Drugs: Comparison of Drug Costs and Patterns of Use in Workers Compensation and Group Health Plans

Posted Date: August 2003

In recent years, the costs for pharmaceuticals rose more rapidly than any other type of medical cost. Pharmaceutical costs now represent a larger percentage of the total medical costs for workers compensation claims as well as for commercial health insurance. In 2001, the cost of prescription drugs rose an alarming 15.7% over 20001. Nationally, spending on prescription drugs comprises roughly 10% of total spending on healthcare and total drug spending may reach $200 billion this year2. Based on the Centers for Medicare & Medicaid Services prediction that drug expenditure growth rates will be maintained, it can be expected that prescription drugs will comprise nearly 15% of total national healthcare spending by 2011.

Key Findings

  • Prescription drug share of medical costs by accident year in Workers Compensation (WC) grew from 6.5% in 1997 to 9.6% in 2001.
  • Utilization has a greater impact on WC drug costs than price.
  • WC pays roughly 125% of the Average Wholesale Price (AWP) of prescription drugs; Group Health (GH) pays only 72%. Therefore, WC paid 74% more than GH for the same drugs.
  • Generic equivalents are prescribed when available 79% of the time for WC claims. A total of 56% of WC costs are associated with drugs that have no generic equivalent. Therefore, savings opportunities from using generic equivalents are only available for approximately 8% of total WC drug costs.
  • Painkillers represent 55% of the cost of prescriptions in WC.