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Work Comp Insurers More Concerned about Drug Utilization Than Unit Price, Says Health Strategy Associates' ``Third Annual Survey of Prescription Drug Management''.

MADISON, Conn. -- Workers' compensation payers are using more sophisticated cost controls to address pharmacy costs, according to the "Third Annual Survey of Prescription Drug Management in Workers' Compensation," conducted by Joseph Paduda of Health Strategy Associates. The survey indicates payers are increasingly concerned about the number and type of prescriptions written, and are searching for ways to better educate treating physicians.

In response to rapidly escalating drug costs driven by higher utilization, payers are changing the way they measure drug spends. Instead of focusing only on unit discounts, they are using metrics such as pharmacy cost-per-claim, trending drug spend on a year-to-year basis, as well as separately examining utilization (the volume and type of drugs dispensed) and per-unit price. Sixty-eight percent of respondents also use retrospective Drug Utilization Reviews (up from 55 percent in 2004). Prospective DURs -- in the form of system edits and prior authorizations -- are also coming into play.

Payers are employing more sophisticated data analysis and technology -- often through Pharmacy Benefit Management (PBM) firms -- to tackle drug costs. All respondents used PBMs to some extent.

Payers look to their PBMs to manage utilization, try to capture first fills, deal with third-party billers, and implement prospective DUR through real-time, electronic eligibility feeds. They also want PBMs to provide better clinical services, identify problem prescribers, flag problem scripts, increase the use of generics, and control the use of pain medications.

Results indicate that payers already using most of these controls -- either in-house or through a PBM -- experienced lower pharmacy cost increases, some as low as two percent, while other respondents reported increases as high as 35%. Nationally, comp prescription costs increased by 10 percent between 2004 and 2005.

"A key finding from the survey is that the drug inflation rates of payers using sophisticated pharmacy cost controls are in the low single digits, while their less-sophisticated competitors are saddled with drug costs that are going up by 15 percent or more. This clearly indicates that effectively managing utilization drives down expenses," Paduda said.

HSA, a Madison, Conn.-based firm, conducted the confidential, qualitative and quantitative survey between Feb. and March 2006. Twenty-two decision makers at workers' compensation payer organizations (carriers, third-party administrators, managed care organizations, and self-insured employers) participated. The survey was sponsored by Cypress Care.

About Cypress Care

Atlanta-based Cypress Care is a full-service workers' compensation Pharmacy Benefits Manager (PBM) -- one of the few PBMs focused exclusively on workers' compensation. With its comprehensive, powerful technology and workers' comp expertise the company has created a new standard in cost containment and customer service. Cypress Care enables adjusters and risk managers to spend less time on pharmacy claims while reducing overall pharmacy expenditures associated with workers' comp. Their customers include some of the largest private/governmental employers and insurance companies in the United States. For more information, please visit

About Health Strategy Associates

Led by Joseph Paduda, Health Strategy Associates ( is a national consulting firm serving insurers, employers and health care providers. Based in Madison, Conn., the firm specializes in managed care and health cost containment in group health, workers' compensation and other insurance lines. Pharmacy costs and similar issues are also covered in Paduda's blog, For a summary of the survey's results email Helen Knight,
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Publication:Business Wire
Date:Aug 25, 2006
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