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Specialty Pharma

Cancer Drugs a Growing Cost Driver in Workers’ Comp

Presumption laws combined with newer, more expensive cancer drugs are a one-two punch municipalities can ill afford.
By: | November 1, 2017 • 4 min read

In recent years, opioids grabbed a prominent role as one of  the biggest pharmaceutical costs in workers’ comp, but with the proliferation of state presumption laws and a rash of chemotherapeutic specialty drugs either hitting the market or in the works, cancer drugs could be poised to become the next pharmaceutical cost driver.

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Over the course of the last decade, at least 36 states passed presumption of compensability laws, which makes some first responders diagnosed with certain types of cancer eligible for workers’ compensation on the presumption that the individual obtained the disease on the job.

While these bills vary widely, the majority of presumption bills cover firefighters for cancers and other conditions presumed to be caused by their exposure to a known carcinogen. Some of the cancers typically outlined as covered include lung, brain, kidney, bladder, rectal and skin cancer, and often also include non-Hodgkin’s lymphoma, leukemia and multiple myeloma.

Phil Walls, the chief clinical officer of myMatrixx, a pharmacy benefit management company owned by Express Scripts and based in Tampa, Fla., said he’s heard payers comment that presumption laws and the specialty drug market keep them up at night.

“Cancer [in workers’ comp] prior to presumption laws was a relatively rare event,” he noted. “For those insurers that cover [these first-responder] populations, I think this is going to have a big impact. Chemotherapy is very expensive. We continue to see escalating drug prices, with most of these within the specialty drug market.”

A recent Express Scripts study noted that more than 830 oncology drugs are in the pipeline.  The company projects that the health care industry can expect to see an increase of more than 20 percent in cancer drug spending each year through 2019, mainly due to patients using these expensive drugs as maintenance therapy.

Elam Herr, assistant executive director, Pennsylvania State Association of Township Supervisors

Firefighters and other first responders who may be covered by presumption of compensability laws make up a statistically insignificant portion of the overall workers’ compensation market.

However, a major cancer claim expense could be fiscally damaging for a small municipality, said Brian Allen, vice president of governmental affairs for San Diego, Calif.-based Mitchell Pharmacy Solutions and a board officer for the American Association of Payers, Administrators and Networks.

Public safety employees represent less than 3 percent of the general working population, but if a firefighter or two goes out on disability because of a cancer presumption, it could increase a small city’s claim costs by 20 to 25 percent, he said.

Premiums Impacted

Allen also noted that most of the expensive oncology drugs new to the market weren’t factored into the fiscal analysis conducted by states that have passed these presumption bills, further impacting the bottom line of smaller municipalities.

Elam Herr, assistant executive director of the Pennsylvania State Association of Township Supervisors, said that when Pennsylvania passed its presumption of compensability bill in 2011, the response by insurers was to drop them. The bill enabled firefighters to report retroactive claims going back 10 years.

“Starting out with claims for 10 years and no reserves as of day one, all the insurance companies and trust bailed on the municipal governments,” Herr recalled, referring to the township members of the association.

Those small municipalities were forced to seek coverage for their predominantly volunteer fire departments through the State Workers’ Insurance Fund, which led to premium jumps ranging from 20 to 40 percent for townships, he said.

“If there’s one thing American people want, it’s the biggest and best of everything. If there’s a miracle drug out there, they’re going to want it.” — Elam Herr, assistant executive director, Pennsylvania State Association of Township Supervisors

Since Pennsylvania’s bill took effect, 261 firefighters petitioned for coverage under the cancer presumption, but only 19 are volunteer firefighters — a smaller figure than Herr and others anticipated.

However, he is still wary about the impact of the law and increasingly expensive oncology drugs.

“I think any type of drug today will drive up cost,” he said. “If there’s one thing American people want, it’s the biggest and best of everything. If there’s a miracle drug out there, they’re going to want it.”

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Representatives of the Arizona League of Cities and Towns are similarly concerned about the impact of presumption bills on comp coverage. In 2016, the Arizona legislature added 12 new cancers to the presumption statute, including skin and prostate cancers, which are common in Arizona.

Arizona’s law allows workers who served as firefighters and peace officers for at least five years to file claims within 15 years of their last date of employment.

“We’re in a new era for workers’ comp for all employers … we’ve got a mix of factors that create the potential for quite a lot of cost,” said Alex Vidal, a legislative associate at the Arizona League of Cities and Towns.

“In terms of drug costs, when you’re treating something as complicated of cancer, the health insurance system is best set up to handle that type of treatment. In workers’ comp, because of their fee schedule system and restrictions, [the system] isn’t able to get the kind of savings that health insurers get, and medical costs can be more expensive.” &

Angela Childers is a Chicago-based writer specializing in health care and business management. She can be reached at [email protected]

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