The Workers Compensation Research Institute released the sixth edition of its Interstate Variation and Trends in Workers’ Compensation Drug Payments FlashReport on May 21, analyzing Q1 2025 prescription payment data across 31 states. The headline finding: delivery pharmacies and physician dispensing together account for more than 70% of all dermatological prescription payments in 20 of the 31 study states, with the highest-share states reaching 80% to 95%.
Dermatological agents are the single largest drug class by payment share in workers’ comp, accounting for roughly 23% of prescription payments in the median study state and topping 30% in 12 states. That concentration means the channel through which these drugs are dispensed is not a billing footnote. It is the primary cost driver.
The channel price gap
The cost differential between dispensing channels is steep. In Pennsylvania, delivery pharmacies averaged $653 per prescription compared to $136 at traditional retail pharmacies, a nearly fivefold spread. Physician dispensing carries similar economics: physician-dispensed topicals account for a small share of all topical prescriptions but roughly 40% of all topical drug spend, a price concentration effect that extends well beyond clinical justification. WCRI research has consistently found physician-dispensed drugs cost between 60% and more than 300% above identical medications at retail.
Who it affects
Self-insured employers in states where delivery pharmacy and physician dispensing dominate are most exposed, particularly those without fee schedule controls on these channels. If your pharmacy severity pick uses a blended national benchmark rather than state-specific, channel-adjusted cost assumptions, you are likely understating the pharmacy component of your medical severity trend. A self-insured construction or manufacturing employer in a high-delivery state could be carrying a pharmacy cost load several multiples above what a national average implies.
WCRI President and CEO Ramona Tanabe noted that “delivery pharmacies have become an increasingly important dispensing channel in many states, not only for dermatologicals,” and that the study identifies which states had higher use of physician dispensing and where delivery pharmacies were more common.
Where this shows up in your reserves
The dispensing channel effect is a severity driver. It inflates the medical cost per claim in your development triangle without changing claim frequency. If your actuary’s medical severity trend selection relies on an industry composite that blends high-delivery and low-delivery states, the trend will understate realized cost in states where these channels dominate. The gap shows up in the medical-only and medical-on-lost-time severity rows of your reserve report.
What this means for your next review
Ask your actuary whether the pharmacy severity pick for each state reflects the actual dispensing channel mix or defaults to a blended national average. Request the WCRI benchmark comparison for your operating states. If your state enacts fee schedule controls on delivery pharmacy reimbursement (as Florida’s courts moved to restrict physician dispensing earlier this year), quantify the expected severity reduction for open claim years. The sixth edition’s addition of migraine drugs as a separate tracking category, with utilization per claim up 9.6% and per-script cost up nearly 10%, is worth flagging as a secondary trend to monitor.