Topicals increasingly plague comp system

The workers compensation industry continues to grapple with the rise in the use of costlier topical medications for pain management.

Some say the drugs pose health dangers and that abusive pricing practices fuel their proliferation in costs.

Overall prescription costs per workers comp claim rose 4.3% last year, driven in part by “high-cost topical agents predominantly obtained through out-of-network channels,” while opioid prescribing continued to decline, according to a report released Oct. 1 by Enlyte.

Topical medications, while representing only 13.9% of out-of-network prescriptions, account for a disproportionate 40.2% of out-of-network spending, according to the report. Enlyte classified the drugs as “opportunistic products,” which include private-label topical analgesics and other “cost-inflated products,” representing just 3.9% of prescription volume but accounting for 20.5% of total costs.

The industry has tracked the correlation between the dip in opioids and the rise in topicals, which are “increasingly used to manage pain,” said Andrew Newhouse, Southfield, Michigan-based director of clinical pharmacy at Sedgwick.

One of the growing challenges is the use of private-label topicals, “which often combine over-the-counter ingredients into a single topical formulation, but are typically not FDA-approved and come at a significantly higher cost,” he said.

Among the problems are that claims professionals are overriding existing prior authorizations, put in place to ensure evidence-based care, and some don’t know that the costlier compounded medications can be replaced by cheaper over-the-counter drugs that can be just as effective, according to Silvia Sacalis, Tampa, Florida-based vice president of clinical services for Healthesystems.

“It’s a behavior that continues to need support in the form of education, so repetition with appropriate information on alternative over-the-counter options to the compound (topicals) is the key, and this needs to be ongoing,” she said.

The Food and Drug Administration does not approve private-label topicals, thus the medications lack the controlled clinical trials that test for safety or efficacy, Ms. Sacalis said.

Many private-label topicals “contain ingredient concentrations exceeding FDA-recommended thresholds, posing risks such as chemical burns, skin irritation and unintended transfer via skin contact,” she said.

“Abusive pricing practices” in topicals have contributed to the problem, said Nikki Wilson, Omaha, Nebraska-based senior director of clinical pharmacy services at Enlyte.

“It’s not like the topical agent itself is inappropriate or doesn’t make sense for an injury; it’s a select few manufacturers that have found that these things are covered,” she said. The manufacturers then make their own products and mark up the price “significantly,” Ms. Wilson said, sometimes in thousands of dollars.

The industry is working with regulators in several states to reverse the trend of physician dispensing and “the proliferation of high-cost topicals,” Mr. Newhouse said.

“In order to prevent further wasting of money on high-cost dermatological medications, it is imperative to work with state governments to update legislation and fee schedules as necessary to drive towards those medications that bring value and not waste,” he said.

One example is Georgia’s 2024 updates to its medical fee schedule, in which regulators introduced reimbursement limits for topical medications and compound topicals, replacing previously uncapped pricing with a standardized reimbursement structure, Mr. Newhouse said.

Ms. Sacalis, citing payment caps as a solution, noted another example: In 2022, the South Carolina Workers’ Compensation Commission adopted a prescription topical medication cap and a prescription topical compound cap.

According to a 2024 report by the Workers Compensation Research Institute, South Carolina saw a significant reduction in payment shares for dermatological agents, decreasing from a peak of 55% in 2021 to 36% in the first quarter of 2023, she said.

In the meantime, those managing the pharmacy side of claims can address the providers who dispense the drugs, according to Ms. Wilson. She noted that there is an ever-growing list of manufacturers marketing directly to physicians for dispensing from their offices, which is contributing to the problem.