1. 1 Pharmaceutical Descriptive Analysis Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group July 2007

2. 2 Overview Data and Methods Distribution of System Costs Utilization and Costs by Prescription Year: –Injury Year –Injury Type –Therapeutic Classification Group –Therapeutic Classification Sub-Class Payment Denial Patterns Generic Substitution Patterns Summary of Key Results Next Step

3. 3 Data and Methods  Data sources:  DWC 837 Medical data  Medi-Span Master Drug Database (Classification Groups)  ECS 2000-2004 Medical/Hospital Bills (To identify Injury Types)  Data Parameters:  Injury Years 1991 – 2006  Prescription Years 2005 and 2006  Prescriptions for 90 Days or less (99.8% of all data)  Dropped prescriptions with denials for Duplicate, Entitlement, and Compensability issues

4. 4 Data and Methods, Continued  Measures:  Prescriptions: Number of Billing Lines  Units = Number of Days  Payments  Charges  Injured Employees (Defined by number of unique SSN/Injury Date)  Injury Types (Standard ICD9 classifications used by REG)  Data Issues:  Injury Types unidentifiable for 30% of prescription bills  The number of Drug Days varied widely

5. 5 System Measures

6. 6 Payments in the Texas Workers’ Compensation System Prescription Years 2005 - 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note 1: Percent of Total Payments may not add up to 100% because of rounding. Note 2: The California Workers’ Compensation Institute (CWCI) estimates that in 2005 California’s Pharmacy cost was 7 percent of that state’s medical costs. Medical Type Prescription Year 2005 Prescription Year 2006 Total Payments Percent of Total Payments 1 Total Payments Percent of Total Payments 1 Professional $626,309,00062% $535,603,000 57% Hospital $250,938,00025%$275,923,00029% Pharmacy $132,973,00013% 2 $131,647,00014% 2 Dental $580,000<1%$1,049,000<1%

7. 7 Percent of Medical Payments in the Texas Workers’ Compensation System by Medical Type, Prescription Years 2005-2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note 1: Percent of Total Payments may not add up to 100% because of rounding.

8. 8 Payment to Charge Ratio Texas Workers’ Compensation System Prescription Years 2005 - 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007.

9. 9 Injured Employees Receiving Prescriptions in the Texas Workers’ Compensation System Prescription Years 2005 - 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007.

10. 10 Pharmaceuticals in The Texas Workers’ Compensation System Utilization and Costs

11. 11 Distribution of Pharmaceutical Utilization and Payments by Injury Year Prescription Year 2006 Injury Years Number and (%) of Injured Employees Number and (%) of Prescriptions Number and (%) of Drug Days Total and (%) of Payments 1991 - 200021,094 (13%) 545,591 (33%) 12,749,849 (40%) $61,061,807 (46%) 2001- 200425,666 (15%) 457,480 (28%) 9,770,829 (31%) $38,651,958 (29%) 200523,766 (14%) 252,673 (15%) 4,288,462 (14%) $14,898,811 (11%) 200697,699 (58%) 392,822 (24%) 4,759,971 (15%) $17,034,883 (13%) Total 168,2251,648,56631,565,111 $131,647,459 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note 1: Percent of Total Payments may not add up to 100% because of rounding.

12. 12 Pharmaceutical Utilization and Payments by Injury Year Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007.

13. 13 Average Pharmaceutical Utilization and Payments Per Injured Employee by Injury Year, Prescription Year 2006 Injury Years Number of Injured Employees Average Number of Prescriptions Per Injured Employee Average Number of Drug Days Per Injured Employee Average Payment Per Injured Employee 1991 - 200021,09425.8604$2,895 2001- 200425,66617.8381$1,506 200523,76610.6180$627 200697,6994.049$174 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007.

14. 14 Pharmaceutical Utilization and Payments by Injury Year Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007.

15. 15 Distribution of Pharmaceutical Utilization and Payments by Injury Type, Prescription Year 2006 Injury Type Number and (%) 1 of Injured Employees Number and (%) 1 of Prescriptions Number and (%) 1 of Drug Days Total and (%) 1 of Payments Low Back S.T. 27,020 (16%) 293,250 (18%) 5,560,347 (18%) $21,506,129 (16%) Shoulder 10,989 (7%) 85,193 ( 5%) 1,370,246 ( 4%) $4,851,641 (4%) Hand-Wrist S.F. 9,645 (6%) 28,596 (2%) 352,444 ( 1%) $1,489,780 (1%) Neck 8,263 (5%) 104,803 (6%) 1,995,353 ( 6%) $7,601,174 (6%) Low-Back N.C. 6,287 (4%) 116,067 (7%) 2,327,423 ( 7%) $9,202,987 (7%) Hand-Wrist S.T. 6,166 (4%) 31,914 (2%) 493,668 ( 1%) $1,748,383 (1%) Knee 5,321 (3%) 37,710 (2%) 576,614 ( 2%) $2,024,647 (2%) Ankle-Foot S.T. 4,777 (3%) 22,859 (1%) 347,788 ( 1%) $1,292,345 (1%) Multiple S.T. 2,651 (2%) 20,144 (1%) 362,711 ( 1%) $1,248,457 (1%) Hand-Wrist N.C. 1,725 (1%) 16,191 (1%) 312,917 (1%) $1,186,166 (1%) Other 61,993 (36%) 436,474 (27%) 7,526,788 (24%) $29,626,946 (23%) Unknown 2 23,388 (13%) 455,365 (28%) 10,342,812 ( 33%) $49,868,801 (37%) Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note 1: Percents may not add up to 100% because of rounding. Note 2: More than 30% of injured employees with unknown injury types were injured between 1991 and 1995

16. 16 Pharmaceutical Utilization and Payments by Injury Type Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note *: More than 30% of injured employees with unknown injury types were injured between 1991 and 1995

17. 17 Distribution of Pharmaceutical Utilization and Payments Per Injured Employee by Injury Type, Prescription Year 2006 Injury Type Number of Injured Employees Average Number of Prescriptions Per Injured Employee Average Number of Drug Days Per Injured Employee Average Payment Per Injured Employee Low Back S.T. 27,020 47888$3,433 Shoulder 10,989 8126$445 Hand-Wrist S.F. 9,645 337$155 Neck 8,263 13243$924 Low-Back N.C. 6,287 487$343 Hand-Wrist S.T. 6,166 19287$1,018 Knee 5,321 7109$383 Ankle-Foot S.T. 4,777 573$272 Multiple S.T. 2,651 8137$472 Hand-Wrist N.C. 1,725 351$194 Other 61,993 7123$486 Unknown 1 23,388 20448$2,158 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note 1: More than 30% of injured employees with unknown injury types were injured between 1991 and 1995

18. 18 Pharmaceutical Utilization and Payments by Selected Injury Types Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note *: More than 30% of injured employees with unknown injury types were injured between 1991 and 1995

19. 19 Pharmaceutical Utilization and Payments by Therapeutic Classification Group Prescription Year 2006 Therapeutic Classification Group * Number of Injured Employees Number and (%) of Prescriptions Number and (%) of Drug Days Total and (%) of Payments ANALGESICS - OPIOID102,628522,521 (32%) 8,648,112 (27%) $43,046,837 (33%) ANALGESICS – ANTI-INFLAMMATORY 91,634257,092 (16%) 5,242,347 (17%) $18,637,705 (14%) MUSCULOSKELETAL THERAPY 59,233225,173 (14%) 4,653,704 (15%) $17,141,168 (13%) ANTIDEPRESSANTS18,12999,189 (6%) 2,697,351 (9%) $9,164,644 (7%) ANTICONVULSANTS16,37896,298 (5%) 2,568,263 (8%) $14,362,712 (11%) HYPNOTICS12,67264,116 (4%) 1,635,314 (5%) $6,315,282 (5%) ANTIANXIETY AGENTS9,17340.668 (2%) 947,215 (3%) $2,030,153 (1%) OTHER GROUPS67,222343,509 (21%) 5,176,805 (16%) $20,948,958 (16%) Total377,069 **1,648,56631,569,111$131,647,461 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note*: The 7 selected groups are the most frequently utilized groups (79% of all prescriptions) in the Texas WC system. The Other Groups are the remaining 82 less frequently utilized groups (21% of all prescriptions). Note**: Total number of Injured Employees include duplicates since each employee could receive prescriptions from multiple therapeutic classification groups.

20. 20 Cumulative Distribution of Pharmaceutical Prescriptions by Therapeutic Classification Group Prescription Year 2006 Therapeutic Classification Group Number of Prescriptions Cumulative Percentage of Prescriptions Total and (%) of Payments Cumulative Percentage of Payments ANALGESICS - OPIOID 522,521 (32%) 32% $43,046,837 (33%) 33% ANALGESICS – ANTI- IFLAMMATORY 257,092 (16%) 48% $18,637,705 (14%) 47% MUSCULOSKELETAL THERAPY 225,173 (14%) 62% $17,141,168 (13%) 60% ANTIDEPRESSANTS99,189 (6%) 68% $9,164,644 (7%) 67% ANTICONVULSANTS96,298 (5%) 73% $14,362,712 (11%) 78% HYPNOTICS64,116 (4%) 77% $6,315,282 (5%) 82% ANTIANXIETY AGENTS 40.668 (2%) 79% $2,030,153 (2%) 84% OTHER GROUPS *343,509 (21%) 100% $20,948,958 (16%) 100% Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note*: Texas WC prescriptions in 2006 were for 6,001 unique Drug Names from 626 Subclasses. The Subclasses fall into 89 distinct Therapeutic Classification Groups as defined by the Medi-Span classification system

21. 21 Most Frequently Dispensed Prescriptions by Therapeutic Classification Subclass* Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note*: These 40 subclasses represent all the subclasses found in the 7 most frequently utilized Therapeutic Classification Groups Therapeutic Classification Subclass* Number of Prescriptions Number of Drug Days Number of Injured Employees Total Payments 1. Hydrocodone Combinations 309,9904,797,08870,786$12,547,298 2. Central Muscle Relaxants 224,1884,633,85260,103$16,920,573 3. Nonsteroidal Anti-inflammatory Agents 199,7443,815,13380,491$11,407,594 4. Opioid Agonists 114,2702,502,03326,185$25,394,160 5. Anticonvulsants - Misc. 82,9942,218,22916,750$13,511,221 6. Non-Benzodiazepine - GABA-Receptor Modu 55,3091,409,85711,182$5,974,277 7. Cyclooxygenase 2 (COX-2) Inhibitors 52,4431,305,93518,229$6,652,473 8. Propoxyphene Combinations 51,626668,06520,939$1,720,978 9. Benzodiazepines 37,127876,5317,989$1,803,903 10. Selective Serotonin Reuptake Inhibitors 33,774915,1456,620$3,439,146

22. 22 Most Frequently Dispensed Prescriptions, Continued by Therapeutic Classification Subclass* Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note*: These 40 subclasses represent all the subclasses found in the 7 most frequently utilized Therapeutic Classification Groups Therapeutic Classification Subclass* Number of Prescriptions Number of Drug Days Number of Injured Employees Total Payments 11. Tramadol Combinations 27,151379,24412,017$1,872,588 12. Tricyclic Agents 25,549688,7085,886$751,348 13. Serotonin-Norepinephrine Reuptake Inhib 23,240640,6014,646$3,629,052 14. Anticonvulsants - Benzodiazepines 10,589275,3892,156$483,467 15. Codeine Combinations 8,425111,8703,592$282,020 16. Modified Cyclics 7,833209,7371,823$288,114 17. Benzodiazepine Hypnotics 7,444189,4241,911$236,589 18. Antidepressants - Misc 6,906191,2721,406$879,031 19. Opioid Combinations 5,973113,1972,062$724,693 20. Nonsteroidal Anti- inflammatory Agent Co 4,854120,3191,715$550,776

23. 23 Most Frequently Dispensed Prescriptions, Continued by Therapeutic Classification Subclass* Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note*: These 40 subclasses represent all the subclasses found in the 7 most frequently utilized Therapeutic Classification Groups Therapeutic Classification Subclass* Number of Prescriptions Number of Drug Days Number of Injured Employees Total Payments 21. Opioid Partial Agonists 3,87459,9891,089$428,992 22. Antianxiety Agents - Misc. 3,54170,6841,445$226,250 23. Alpha-2 Receptor Antagonists (Tetracycl 1,88351,768376$176,472 24. Selective Melatonin Receptor Agonists 1,23732,280539$102,486 25. GABA Modulators 1,16631,715234$209,783 26. Hydantoins 79222,072161$32,360 27. Valproic Acid 75520,827138$125,464 28. Pentazocine Combinations 5848,475179$34,705 29. Muscle Relaxant Combinations 58011,245243$55,054 30. Dihydrocodeine Combinations*** 4916,663219$37,424

24. 24 Most Frequently Dispensed Prescriptions, Continued by Therapeutic Classification Subclass* Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note*: The first 40 subclasses represent all the subclasses found in the 7 most frequently utilized Therapeutic Classification Groups Therapeutic Classification Subclass* Number of Prescriptions Number of Drug Days Number of Injured Employees Total Payments 31. Viscosupplements 2764,665215$149,879 32. Meperidine Combinations 1371,48849$3,980 33. Direct Muscle Relaxants 1293,94223$15,662 34. Barbiturate Hypnotics 772,55215$815 35. Non-Barbiturate Hypnotics 421,13314$1,072 36. Pyrimidine Synthesis Inhibitors 4066914$12,613 37. Soluble Tumor Necrosis Factor Receptor 112911$14,248 38. Antihistamine Hypnotic Combinations 7683$43 39. Monoamine Oxidase Inhibitors (MAOIs) 41203$1,481 40. Succinimides 2311$416 Subtotal (40 Subclasses)1,305,057 (79%)26,392,306 (84%)361,449$110,698,503 (84%) OTHER (586 Subclasses)343,509 (21%)5,176,805 (16%)68,412$20,948,959 (16%)

25. 25 Five Most Frequently Utilized Drug Subclasses * Total Number of Prescriptions Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note*: These 5 subclasses represent 56 percent of all the drugs dispensed in the Texas workers compensation system

26. 26 Pharmaceuticals in The Texas Workers’ Compensation System Prescription Denials

27. 27 Most Frequently Denied Prescriptions by Therapeutic Classification Groups Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note*: Total number of injured employees include duplicates since each employee could receive prescriptions from multiple therapeutic classification groups. Therapeutic Classification Group Number of Denied Prescriptions Number of Injured Employees W/Denied Prescriptions * Total Denied Charges OTHER GROUPS71,219 (42%)13,020$23,732,524 ANALGESICS – OPIOID34,020 (20%)14,062$3,038,485 ANALGESICS - ANTI-INFLAMMATORY22,729 (13%)11,515$1,988,809 MUSCULOSKELETAL THERAPY AGENTS18,020 (11%)8,267$1,781,442 ANTIDEPRESSANTS9,183 (5%)3,506$1,051,773 ANTICONVULSANTS6,618 (4%)2,889$1,170,175 HYPNOTICS5,123 (3%)2,285$602,530 ANTIANXIETY AGENTS3,610 (2%) 1,630$250,892 Total170,52257,174*$33,616,630

28. 28 Approved and Denied Prescriptions by Therapeutic Classification Groups Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007.

29. 29 Five Most Frequently Denied Drug Subclasses Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note*: The Other Subclasses group represents 586 subclasses system

30. 30 Percent of Denied Prescriptions by Denial Codes Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007.

31. 31 Percent of Denied Prescriptions by Injury Types Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007.

32. 32 Pharmaceuticals in The Texas Workers’ Compensation System Generic Substitution

33. 33 Generic Substitution Rate Where Generics were available * Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007. Note* : Approximately 85,000 prescriptions (5 percent) did not have generics available

34. 34 Generics and Brand Name Frequencies by Therapeutic Classification Groups Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007.

35. 35 Generic Substitution Rates Therapeutic Classification Groups Prescription Year 2006 Source: Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group, 2007.

36. 36 Summary Pharmaceutical costs comprise 14 percent of all workers’ compensation costs in Texas Seventy two percent of all pharmaceutical charges are paid (compared to 60 percent for dental, 39 percent for professional, and 29 percent for hospital bills) Approximately 48 percent of all injured workers receiving medical services in 2006 also received prescribed drugs for their injuries Injuries sustained between the years 1991 and 2000 (13%) account for a disproportionate share of pharmaceutical costs in 2006(46%) Among the identifiable injury types, Low Back soft tissue injuries account for the highest number of prescriptions

37. 37 Summary, Continued A total of 7 of the 89 Therapeutic Classification Groups (40 of the 626 Subclasses) account for 79 percent of all the prescriptions filled in 2006 Approximately 10% of prescriptions and 28% of charges are denied Approximately 11% of Hypnotics prescriptions are substituted to the generic alternative