Double-digit pharmacy cost increases could hurt workers' comp costs

Active employees in the U.S. are expected to see increasing pharmacy costs, Aon says, which could mean bad news for comp costs.

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Active employees in the U.S., as well as pre- and post-65 retirees are expected to see drifting pharmacy costs by low double-digits come 2016, an analysis by Aon Plc’s Aon Hewitt group has predicted - something that could lead to increases in workers' compensation costs.
 
Aon Hewitt’s report said,  “Pharmacy cost increases before plan design changes are projected to be 9.5% in 2015 and will continue to rise to 10% in 2016.”
 
Researchers added that a similar rate of increase will be seen in 2017, as pharmacy costs may rise by 10.5%.
 
"Medical cost increases over the past few years have offset some of the higher pharmacy costs in the short-term, but for 2015 and 2016, there will be more pressure than relief on pharmacy cost," said Tim Nimmer, global chief actuary for Aon Health.
 
"This is primarily due to high price inflation for brand and specialty drugs, a slowdown in blockbuster drugs losing patent protection, generic dispensing rates leveling off, and the robust pipeline of specialty drugs including the new Hepatitis C treatments. If left unmanaged, these issues could have a significant impact in pushing these increases even higher."  
 
The increased costs will likely mean a similar rise in workers' compensation costs. Already, even generic drugs like antibiotics, antidepressants and opiod painkillers are pushing premiums higher. According to congressional testimony from workers' comp professionals, such medications used in comp claims saw price increases ranging form 8.5% to nearly 2,050% in 2014 versus 2013.

Those testifying before the US Senate urged the government to take action in preventing similar cost increases, laying blame on lax regulations that allow excessive consolidation among pharmacies and artificially inflated pricing.

“Manufacturers of generic drugs that legally obtain a market monopoly are free to unilaterally raise the prices of their products,” said Drs. Jonathan Alpern, William Stauffer and Aaron Kesselheim in a perspective published last November in the New England Journal of Medicine. “The Federal Trade Commission will not intervene without evidence of a conspiracy among competitors or other anticompetitive actions that sustain the increased price.”

Aon PLC is one of the global providers of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. The company’s counterpart, Aon Hewitt, publishes the semi-annual Spring Trend report, which is a prospective estimate of future medical trends.
 

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