Insights for Employers on Managing Drug Utilization Review in Workers’ Compensation

Tighter oversight of medication use equates to getting a better handle on overall workers’ compensation medical costs, two industry experts told employers during a recent online presentation.

Messages conveyed to employers during the session on Drug Utilization Review: How to Get Workers’ Comp Costs Under Control are instructive to occupational health professionals who are in the position of attempting to satisfy the needs of client companies as well as patients, payers, and regulators in the management of work-related injuries and illnesses.


In 2008, prescription drugs represented 19 percent of workers’ compensation medical dollar distribution, according to the National Council on Compensation Insurance (NCCI). Also of note, prescription drug costs as a percentage of total medical costs increase significantly as a claim ages and enters the $500,000 to $1 million range, the NCCI reports. In many instances these cases involve chronic pain and the use of prescription analgesics.

This suggests a dichotomy in the treatment of work-related conditions and associated pharmacy management. On one hand, there is a need for early intervention and a focus on return to function to avert escalation of disabling conditions during the life of a claim. On the other hand, there is an immediate need to aggressively address high-cost, long-term cases. Sometimes the occupational health provider is pulled in both directions.

Complex Variables

Pharmacy management is a piece of the puzzle that is easily fractured into smaller components, creating a complex set of variables. For example, in some cases, a physician may prescribe a certain medication because it is likely to promote more rapid healing and result in an earlier return to work by an injured employee. However, in prescribing the medication, the treating physician may be subject to complaints from an employer seeking to avoid a recordable injury triggered by the prescription and/or questions from a utilization reviewer about the efficacy and cost-effectiveness of the drug prescribed.

There is also the patient’s attitude to consider: Some patients feel they are being short-changed if they don’t get a prescription for what ails them, while others want to try natural or alternative remedies first.

“We spend a great deal of time focusing on the first prescription fill, but most of the spend is on more complex and long-term costly claims,” said Maddy Bowling, president of Maddy Bowling & Associates Consulting, Inc., a Wheaton, Ill.-based firm specializing in workers’ compensation, group health, and disability management. “Pharmacy management involves far more than just managing the unit cost of care.”

“In terms of pharmacy management, my advice is to see the big picture and recognize that drug selection strategies are part of the solution, but not the whole solution,” added David Deitz, M.D., vice president and national medical director for commercial professional services at Liberty Mutual Group, one of the nation’s leading insurance carriers. “Effective management of chronic pain involves many components.

“You have to work at it a little harder in workers’ compensation than in group health. You have to keep your eye on the ball and properly use all of the management tools. But it is possible to maintain control of pharmacy spending and have a really good program that is both fair and comfortable for injured workers and keeps costs down for the employer.”

Dr. Deitz and Ms. Bowling served as co-presenters during the online session sponsored by Risk & Insurance magazine and supported by Progressive Medical, Inc., a firm specializing in workers’ compensation cost containment programs.

Control Mechanisms

Fee management, utilization management and disability management are the three legs that support the workers’ compensation pharmacy cost control stool, Ms. Bowling said. Depending on the circumstances, these functions may be performed prospectively, concurrently or retrospectively.

Prospective (before the script is filled) fee management includes the use of fee schedules, in-network discounts and, in some states, mandated use of generic medications. Workers’ compensation-specific formularies, edits and blocks are examples of prospective utilization review practices, although the latter two are not considered to be particularly effective. Examples of concurrent (during the life of the claim) pharmacy management techniques include expanded network penetration, analysis of drug usage to determine a need for intervention with the treating physician and evaluation the impact of pharmaceuticals on the length of disability.

For instance, concurrent utilization review involves questions such as: Is the drug necessary? Is it appropriate to this stage of the claim? Is the worker taking any other medications, and if so, what are they? Is the patient working? Will taking the medication have an impact on the length of disability? How long should the patient stay on this medication or a combination of medications?

“During the life of a claim, data mining and analytics can be used to follow certain triggers such as multiple prescriptions, therapeutic duplications, inappropriate duration or intensity, and opioid use,” Ms. Bowling said. “Pharmacy management changes over the life of a claim. That’s why you need to use stage-of-claim forms and triggers.”

Intervention letters to treating providers can be effective, but studies have shown that doctor-to-doctor peer consultation is a more effective strategy. “Perhaps this same phone call to the treating physician about prescription drug use can lead to a discussion about the worker’s ability to return to work,” Ms. Bowling suggested.

Retrospective review typically involves an examination of the history of older/chronic pain cases to identify opportunities to intervene with the physician and claimant.

“In the pharmacy context, disability management means assuring appropriate use of scripts and length of disability,” Ms. Bowling said. “We are probably not doing enough retrospective review on the old, expensive cases on the books of all payers. If we did more, the outcome would be extremely positive.”

Other Lessons

In addition to the use of pharmacy benefit management companies that control prices via guarantees and the use of network pharmacies, injury-specific formularies also are gaining traction among employers as a cost-control strategy, Dr. Deitz said. For example, if a muscle relaxant were prescribed for an eye injury, the claim would automatically be flagged for review, but not if it were prescribed for a low-back injury. Meanwhile, Dr. Deitz sees the increasing popularity of in-office dispensing as a “rising problem” for employers.

“A growing number of physicians are dispensing medications in the office with no pharmacy involved,” he said. “This strategy is being heavily marketed to physicians by third-party repackagers as a practice-revenue builder. The third-party repackages the medications, supplies them to the doctor’s office, and in some cases, provides re-billing services for the drugs that are dispensed.”

According to Dr. Deitz, in-office dispensing represents about a third of total workers’ compensation pharmacy dollars. The drugs that are dispensed are typically low-cost generics or over-the-counter medications. While in-office dispensing is perceived by many as a convenience that encourages patient compliance, Dr. Deitz advises employers to be cautious about potential downsides such as lack of pharmacy management oversight and price mark-ups. Frequent dispensing of opioids is another difficult issue in workers’ compensation, he said. “Some of you may have noticed the Food and Drug Administration (FDA) has scheduled meetings with pharmacy manufacturers to talk about some new prescribing restrictions because they are alarmed by the promotion of narcotics,” he said. The discussion includes the use of “off-label” prescriptions, such as giving a pain medication specifically designed for cancer patients to an injured worker with chronic back pain.

“Part of the FDA’s interest is related to the use of opioids as a useful predictor of what is going wrong with a claim” Dr. Deitz said. “Sometimes there is a question of whether opioids are driving the claim or the underlying condition. It’s probably a bit of both, but studies show opioids do tend to drive costs on a claim.

“People who receive high-dose narcotics early in a claim cost more, and early opioid use predicts later opioid use. This is not surprising to those familiar with workers’ compensation claims.”

Group Health Concepts

According to Dr. Deitz, group health pharmacy management practices provide some helpful insights, although they are not necessarily applicable to workers’ compensation. For example, about 75 percent of employers offer group health formularies with at least three tiers (retail generics, retail preferred brands, and retail non-preferred brands), which allow them to shift costs to the consumer. However, tiered formularies are not effective in workers’ compensation because patients are not responsible for co-payments.

Other group health strategies with applications in workers’ compensation include:• refill controls;

  • mail-order medications, especially for long-term claims;
  • disease management interventions;
  • generic substitution – although the absence of co-pays in workers’ compensation limits consumer support and it is dependent on state regulation and fee schedules;
  • provider networks – but prescribing behavior varies and there are restrictions in about half of the states;
  • prior authorization – depending on the jurisdiction and degrees of cooperation from pharmacy managers;
  • provider profiling – where states allow; and
  • incentives for network use such as coupons and rebate cards.

Therapeutic substitutions and step therapy are not considered useful in workers’ compensation situations, Dr. Deitz said.

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