A 16,000% Problem: Why Workers’ Comp Can’t Get Drug Costs Under Control

Why It Matters

Uncontrolled drug pricing inflates workers’ comp premiums, raising costs for employers and taxpayers. Enabling pharmacy networks would align workers’ comp with other insurance programs, delivering significant savings.

Key Takeaways

• Workers’ comp lacks mandated pharmacy networks in half of states.
• Non‑retail dispensers charge up to 16,000% markup on drugs.
• Private‑label topicals sell for $2,400‑$2,900 versus $9‑$90 OTC.
• State reforms allowing network direction could cut drug costs dramatically.
• Employees retain access to 90% of pharmacies under network rules.

Pulse Analysis

The workers’ compensation system operates in a regulatory vacuum that separates it from the pricing discipline imposed on Medicare, Medicaid and commercial health plans. Those programs rely on pharmacy benefit managers (PBMs) to negotiate contracts with network pharmacies, creating competitive pressure that drives down unit costs. In contrast, roughly half of U.S. states forbid employers or insurers from steering injured workers toward any contracted network, leaving the prescription decision to the patient who bears no financial responsibility. This structural gap eliminates the cost‑sharing signal that typically curbs wasteful spending.

Data highlighted by Enlyte’s Brian Allen reveal the magnitude of the problem. A single unit of diclofenac sodium costs about $0.10 through a PBM contract but jumps to $16.42 when dispensed by a non‑retail workers’ comp pharmacy—a 16,000 % markup. Private‑label topical analgesics, which lack FDA approval and offer no clinical advantage over inexpensive over‑the‑counter options, are billed at $2,400‑$2,900 per treatment versus $9‑$90 for comparable OTC products. These inflated charges flow directly into employer premiums and state fund liabilities, eroding profitability and increasing the tax burden.

State legislators have a clear lever to address the issue: authorize the use of contracted pharmacy networks in workers’ comp programs. By allowing PBMs to apply formulary controls and negotiate rates, states can replicate the market dynamics that have restrained drug costs in other insurance markets. The transition would preserve roughly 90 % of the pharmacies currently accessed by injured workers while eliminating the pricing vacuum that fuels abuse. Early adopters could see double‑digit reductions in drug spend, translating into lower premiums, reduced litigation over billing disputes, and a more sustainable workers’ compensation ecosystem.