From higher prices at the gas pump to increased costs at the grocery store, we’re all feeling the effects of inflation. Many of the proposed solutions — like fixing supply chain disruptions, increasing computer-chip production, and raising interest rates — are out of our control, and we’re merely along for the ride. But, one journey we can refuse to embark on is inflation within workers’ compensation related to physician dispensing — and it starts with topicals.

Topicals at a glance

With opioid usage declining in workers’ compensation over the past few years, some physicians began prescribing and dispensing topicals as an alternative method for treating pain. Unlike orally administered medications, topicals are applied directly to the skin (think sprays, creams, etc.). Certain topicals do offer a clinical benefit, but the specific topicals dispensed by many prescribers warrants further scrutiny. Too often, physicians dispensing topicals and other medications directly from their offices means bypassing established pharmacy safety measures and little-to-no utilization review. Not to mention there can be financial incentives that physicians often receive to dispense out of office.

The culprit behind inflation in workers’ compensation

Physician dispensing of high-cost topicals is driving much of the current wave of inflation we’re seeing in pharmacy. Several players within the workers’ compensation space have now turned their focus to topicals — zeroing in on states with favorable legislation which lack any teeth to prevent or reduce physician dispensing.

This is a difficult form of inflation to measure because there are no related supply chain issues to track and no interest-rate levers to pull. In fact, the end-users of these medications have little insight or visibility into how much the products actually cost. For instance, a patient who is prescribed the topical anti-inflammatory solution diclofenac is likely unaware that it costs $2,325 for a one-month supply. Meanwhile, other topical diclofenac products available over-the-counter (OTC) without a prescription cost between $15 and $30. For the same price as treating a single injured worker with a one-month supply of the physician-dispensed topical, 155 additional injured workers could be treated with less expensive and equally effective OTC options.

Some of the physicians who choose to dispense high-cost topicals over recommending lower-priced OTC options receive financial compensation of some kind. These incentives are likely well supported by the manufacturers and marketers of topicals, who have recruited the dispensing providers, provide the medications, and handle all the necessary billing on their behalf.

Trends we’re seeing

On average, a physician-dispensed topical medication within our book of business costs a little over $1,000. However, the cost of a topical medication not dispensed by a physician typically costs closer to $300. While topicals dispensed by physicians account for only 15% of all topical prescriptions, they account for close to 40% of total spend on topicals.

At Sedgwick, we’re doing all we can to address this issue by:

• Constantly analyzing our data on which physicians are dispensing the most and costliest topical medications.
• Performing pharmacy utilization review (even retrospectively) when possible.
• Enlisting our complex pharmacy management (CPM) team to address these issuess on a claim by claim basis when warranted.
• Collaborating with our pharmacy benefit manager (PBM) partners to develop communiction sent either to physicians or to the injured workers in an effort to bring future prescriptions in-network.
• Partnering with our provider network team to leverage our network capabilities in those states where we’re able to direct towards preferred providers.
• Advocating for legislation in states like Florida, Georgia and Louisiana that would curtail inappropriate physician dispensing of costly medications.

Sedgwick joins many others in the workers’ compensation world in sounding the alarm on physician dispensing of high-priced topicals. This is an issue on which we can band together to advocate for fiscal responsibility and achieve the best possible outcome for injured workers.

What's next in the world of workers' compensation? Stay tuned for related blogs.