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]

More from Risk & Insurance

More from Risk & Insurance

In the Fast-Paced World of Retail, This Risk Manager Strives to Mitigate Risks Proactively and Keep Senior Leaders Informed

Janine Kral works to identify and mitigate risks, building strong partnerships with leaders and ensuring they see her as support rather than a blocker. 
By: | October 29, 2018 • 4 min read

R&I: What was your first job?

My very first paid job was working on my uncle’s ranch in British Columbia in the summers. He had cattle, horses and grapes — an unusual combo. But my first real job out of college was as a multi-line claims adjuster at Liberty Mutual.

R&I: How did you come to work in risk management?

Right out of college I applied for a job that turned out to be a claims adjuster at Liberty Mutual. I accepted because they were offering six weeks of training in Southern California, and at the time that sounded really fun. I spent about three years at Liberty Mutual and then I spent a short period of time at a smaller regional insurance company that hired me to start a workers’ compensation claims administration program.

I was hired at Nordstrom as the Washington Region Risk Manager, which was my first job in risk management. When I started at Nordstrom, the risk management department had about five people, and over the years it has grown to about 75. I’ve been vice president for 11 years.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

I would say that technology has probably been the biggest change. When I started many years ago, it was all paper and no RMIS.

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R&I: What risks does the retail industry face that are unique?

We deal with a lot of people — employees and customers. With physical brick and mortar settings, there are the unique exposures with people moving in and out in a public environment. And of course, with ecommerce, we have a lot of customer and employee data, which creates cyber risk — which is not necessarily a unique risk in today’s environment.

R&I: Can you describe your approach to working with senior leaders and front-line staff alike to further risk management initiatives?

It starts with keeping the pulse of what’s happening with the business. Retail moves really fast. In order to identify and mitigate risks proactively, we identify top risk areas and topics, and then we ensure that we have strong partnerships with the leaders responsible for those areas. Trust is critical, ensuring that leaders see us as a support rather than a blocker.

R&I: What role does technology play in your company’s approach to risk management?

Janine Kral, claims adjuster, Nordstrom

We have an internal risk management information system that all of our locations report events into — every type of incident is reported, whether insured or uninsured. Most of these events are managed internally by risk management, and our guidelines require that prevention be analyzed on each one. Having all event data in one system allows us to use the data for trending and also helps us better predict what may happen in the future, and who we need to work with to mitigate risks.

R&I: What advice might you give to students or other aspiring risk managers?

My son is a sophomore in college, and I tell him and his friends all the time not to rule out insurance as a career opportunity. My advice is to cast a wide net and do your homework. Research all the different types of opportunities. Read a lot — articles, industry magazines, LinkedIn. Be proactive and reach out to people you find interesting and ask them about their careers. Don’t be shy and wait for people and opportunities to come to you. Ask questions. Build networks. Be curious and keep an open mind.

R&I: What are your goals for the next five to 10 years of your career?

I have always been passionate about continuous improvement. I want to continue to find ways to add value to my company and to this industry.

R&I: What is your favorite book or movie?

My favorite book is Shantaram by Gregory David Roberts. It’s a true story about a man who was in prison in Australia after being convicted of armed robbery, and he escaped to India. While in India, he passed himself off as a doctor in a slum. It’s a really interesting story, because this is a convicted criminal who ends up helping others. I am not always successful in getting others to read the book because it’s 1,000 pages and definitely a commitment.

R&I: What’s the best restaurant you’ve ever eaten at?

Fiorella’s in Newton, Massachusetts. Great Italian food and a great overall experience.

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R&I: What is your favorite drink?

“Sister Carol.” I have no idea what is in it, and I can only get it at a local bar in Seattle. It’s green but it’s delicious.

R&I: What is the riskiest activity you ever engaged in?

Skydiving. Not tandem and without any sort of communication from the ground. Scary standing on a wing of a plane, but very peaceful once the chute opened, slowly floating down by myself.

R&I: If the world has a modern hero, who is it and why?

I can’t think of one individual person. For me, the real heroes are people who have a positive attitude in the face of adversity. People who are resilient no matter what life brings them.

R&I: What about this work do you find the most fulfilling or rewarding?

It’s rewarding to help solve problems and help people. I am proud of the support that my team provides others. &




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]