Report: ‘Compounded’ Drugs Fueling Workers’ Comp Costs

California physicians could be driving up costs in the state's workers' compensation system by prescribing and dispensing so-called "compounded" prescriptions to patients with work-related injuries, according to a new report by RAND Corporation, the Los Angeles Times reports.

RAND conducted the study after lawmakers asked the California Commission on Health and Safety and Workers' Compensation to look into the growing use of compounded drugs.

About Compounded Drugs

Compounded drugs generally are painkiller creams for individuals who need an alternative to pills. The drugs tend to cost significantly more than similar medications in pill form.

Many of the active ingredients found in compounded drugs are not recommended for use under state guidelines for workers' compensation treatment, according to the RAND report. In addition, FDA does not regulate the use of such drugs.

Report Findings

During the first quarter of 2009, total payments for compounded drug claims made up 12% of all workers' compensation drug costs, according to the RAND report. The figure is significantly higher than during the first quarter of 2006, when payments for compounded drug claims accounted for 2.3% of workers' compensation drug costs. RAND cited a 2010 report by the California Workers' Compensation Institute for the figures.

At the government-run State Compensation Insurance Fund, billings for compounded drugs reached $28 million in 2009, or nearly a quarter of the fund's total prescription billings for that year. In previous years, billings for compounded drugs were so rare that the state did not track them, according to the Times.

Legislator Keeping Eye on Trend

Assembly member Jose Solorio (D-Santa Ana), chair of the Assembly Committee on Insurance, said the increase in prescriptions for compounded drugs is contributing to escalating costs in California's workers' compensation system.

Solorio said he is preparing legislation to rein in unnecessary compound drug prescriptions and plans to hold an oversight hearing on the issue (Lifsher, Los Angeles Times, 1/29).