Inflation and Workers Compensation Medical Costs—Prescription Drugs
Posted Date: March 28, 2023 ``
Key Observations
- From 2012 to 2021, the average drugs-paid cost per claim decreased about 2.6% per year.
- The annual reduction in drug payment per claim varied across four regions, ranging from 2.0% in the Southeastern region to 3.9% in the Western region.
- The price of prescription drugs grew at an annual rate of 3.7%, only to be offset by a 6.0% decline in the type and number of prescriptions.
- Opioid claims1 saw the largest decrease in drug costs, largely due to a reduction in both opioid and nonopioid prescriptions.
- Countrywide (CW), of claims with at least one prescription, the share of these that also had at least one opioid decreased from 55% in 2012 to 26% in 2021.
About this article: This is the final of four installments in NCCI’s series on inflation and workers compensation medical costs. This installment explores price and utilization trends in drug costs, and how each contributes to workers compensation costs in four US geographical regions. This article also provides state-specific results.
Introduction
This last installment of NCCI’s series on inflation and workers compensation (WC) medical costs focuses on changes in drug costs and, in particular, how changes in opioid prescribing have impacted those cost trends. The study explains how these shifts in prescribing patterns contributed to changes in WC medical costs.
Paid Cost per Claim for Drugs
Cumulative Change in Drug Costs Indexed to SY 2012
Regions and Countrywide
CW payments for drugs represent about 7% of WC medical costs. While payments were relatively steady through 2016, they have declined sharply since then. From 2012 to 2021, the average CW drug payment per claim decreased at an average annual rate of 2.6%, for a total drop of about 21% across the last 10 years.
All regions experienced similar declines, ranging from 2.0% to 3.9% per year, with the Southeastern and Western regions having the slowest and fastest growth, respectively.
Opioid vs. Nonopioid Claims
There can be a multitude of medications prescribed during an injured worker’s path to recovery from a workplace injury. Opioids are one type of drug used to treat moderate to severe pain—often when pain is chronic and troublesome. The opioid epidemic brought much needed awareness on the risks associated with opioid prescriptions. Consequently, the CW share of WC claims that included an opioid prescription decreased significantly, from more than 50% in 2012 to under 30% in 2021.
The chart below shows the difference in the share of claims with an opioid prescription (an opioid claim) compared to those without an opioid prescription (nonopioid claims) between 2012 and 2021. The decrease in share of opioid claims is consistent across the geographic regions.
Share of Drug Claims by Opioid vs. Nonopioid Claims
Regions and Countrywide
Once claims are categorized as an opioid claim, drug payments for these claims can be further grouped into payments for opioids, as well as nonopioids. Nonopioid medications are often prescribed concurrently with an opioid to treat its side effects. These payments from opioid claims can then be compared to drug payments for nonopioid claims.
The chart below compares the distribution of payments among these three groups from 2012 to 2021. The 2021 CW share of payments for opioid prescriptions on opioid claims decreased by more than 10% points, halving the 2012 share. In addition, the share of nonopioid prescriptions associated with opioid claims also decreased significantly.
Distribution of Drug Payments by Type of Claim
Regions and Countrywide
The following charts show the contribution of opioid and nonopioid claims to the overall average drug costs from 2012 to 2021. The contribution reflects the shift in the share of opioid claims and the changes in drug prices and utilization. CW, changes in prescribing on opioid claims have resulted in an average annual decrease of 3.8%. Meanwhile, nonopioid claims added 1.3% to the average change in drug costs.
A similar pattern of decrease due to the opioid claims, partially offset by an increase in nonopioid claim experience, describes the changing costs across the regions, with the most notable changes in the Western and Southeastern regions.
Contribution to Change in Drugs Paid Cost per Claim by Type of Drug Claim, 2012 to 2021
Regions and Countrywide
Alabama, Southeastern Region, and Countrywide
Price and Utilization Changes
To further identify causes for cost changes over time, it helps to separate the cost into two components: price and utilization.
- Price changes can be tracked by using a price index2 that measures the change in costs while holding a basket of services constant from one year to the next.
- Conversely, the change in utilization uses an index that tracks the change in number and mix of services while holding prices constant from one year to the next.
The chart to the right shows the CW cumulative change in WC prescription drug prices between 2012 and 2021 compared with the cumulative change using the Consumer Price Index (CPI) for prescription drugs. At 3.7%, WC prices paid grew faster than the more modest annual change of 1.9% based on the CPI for prescription drugs.
Examining regional prescription drug price trends, the average annual growth in prices varies from +2.6% for the Midwestern region to +3.9% in the Northeastern region.
Drug Cumulative Price Changes
Regions and Countrywide
Alabama, Southeastern Region, and Countrywide
In the chart below, the focus is switched to the other component of drug costs—utilization. Changes in utilization reflect changes in types of drugs prescribed, mix, or quantities. This chart shows the cumulative change in utilization for the regions, indexed to 2012.
The annual rate of change in utilization varies from –5.1% in the Midwestern region to –7.2% in the Western region. As such, changes in drug utilization have outweighed price increases, thus driving declines in drug costs over the observed period.
Drug Cumulative Utilization Changes
Regions and Countrywide
Alabama, Southeastern Region, and Countrywide
Concluding Remarks
As the final installment of NCCI’s Inflation and Workers Compensation Medical Costs series, this article provides insight into the contributors of prescription drug costs, as well as differences in trend by US region. While changes in drug prices have been noteworthy throughout the healthcare industry, and even more notably in the WC arena, changes in prescribing patterns, driven by a dramatic decrease in prescribing of opioids, have more than offset price increases. Consequently, despite making up a relatively smaller share of the total medical expenditure in any calendar year, these changes in prescribing patterns have helped mitigate the increase in medical costs over the past 10 years.