Creams, ointments, gels and other topical medications leave a lasting impression as a pain management option but also as a significant pharmacy spend driver. In fact, since 2021, topical medications have surpassed opioids as the number one drug class by spend in the MyMatrixx by Evernorth book of business. We continue to see escalated pharmacy charges for workers’ compensation payors due to certain topical medications being dispensed from non-traditional pharmacies or directly from physicians’ offices at substantially higher rates even though they often use the same ingredients as other widely available and less costly products. The charges from out-of-network pharmacy channels, at times, reflect gaps in existing state regulatory controls.
Defining topical medications
The term "topical medication" refers to a medication's method of administration. Topical medications are applied directly to a specific area of the body, most commonly the skin. In workers' compensation, topical analgesics in the form of creams, ointments, gels, lotions, sprays, and patches are frequently used to manage localized pain and inflammation for common occupational injuries and conditions including sprains and strains, contusions, tendonitis, musculoskeletal pain, and certain neuropathic pain syndromes.
Two ways topicals become too pricey
Like many medications, there are inexpensive options and expensive options. With topicals, medication availability is at the root of two scenarios that can drive up their cost.
- Two medications with the same active ingredient but different National Drug Codes (NDCs) and, dependent on the manufacturer, possibly considerably different prices. Costs increase when an available higher-cost NDC is dispensed instead of seeking out the clinically equal, lower-cost NDC.
- Two medications with two NDCs that are similar in therapeutic effect but have a slightly different strength or dosage. The NDCs for these similar medications can also have vastly different prices and, while not a one-for-one therapeutic equivalent, the lower-cost NDC may still be an effective therapeutic alternative to the higher-cost NDC.
We often see this second scenario when a reasonably priced medication is intentionally modified by adjusting its strength or combining it into a kit to create a new NDC that can be assigned a much higher price.
The industry is feeling the pricing pain
A recent Workers’ Compensation Research Institute (WCRI) report1 found that in an analysis of 31 state workers’ compensation systems, dermatological agents accounted for 23% of prescription payments in the median state and exceeded 30% in 12 states.
In addition, physician dispensing and home delivery pharmacies accounted for 80-95% of dermatological payments in states with the highest dermatological payment shares.
States are responding with regulatory developments
Workers’ compensation generally provides coverage for all reasonable and medically necessary treatment related to a compensable work injury, subject to applicable state law and regulatory requirements. For workers’ comp. payors, this means that costs associated with the injury-related treatment need to be controlled and several states are proposing and adopting regulatory actions to do just that.
For example, WCRI reported that reimbursement limits for topical medications adopted in Georgia and South Carolina reduced dermatological payments significantly.1 In Georgia, the reimbursement limits took effect in April 2024 and what followed was a drop in dermatological payment shares from 55% in early 2024 to 17% by early 2025.
But Georgia and South Carolina are not alone. The following paragraphs describe developments in several other states that may be looking to address this topic. The MyMatrixx Regulatory Affairs team has provided guidance, information, feedback, and recommendations for these states and others on how they are addressing the rising costs of topicals in their workers’ comp systems.
- The Alaska Workers’ Compensation Division’s Medical Services Review Committee is reviewing potential updates to the medical fee schedule. This includes pharmaceutical issues and concerns such as physician dispensed, compounded, topical, and repackaged medications, and considering new or amended fee schedule language based in part on language adopted in other states. Any changes agreed to in 2026 would be formally proposed for the 2027 fee schedule.
- The Arizona Industrial Commission and their Medical Resource Office (MRO) have been discussing prescription topical medications with stakeholders over the last year including updates to their fee schedule language. With the latest proposed draft, the intent is for any adopted changes to become effective in May of 2027.
- With certain limitations already in place, the Colorado Division of Workers’ Compensation proposed additional regulatory controls for topicals as part of their annual medical fee schedule rule changes for 2027. Among other changes, the Division proposed to:
- Strengthen prior authorization requirements for combination topical agents, patches, and other products when lower-cost therapeutically equivalent prescription or over-the-counter (OTC) alternatives exist
- Add provider documentation requirements for failed alternative therapies
- Limit reimbursement for certain topical products absent prior authorization
- The Mississippi Workers’ Compensation Commission adopted several fee schedule changes effective in June 2026, including new limitations on coverage and reimbursement for physician dispensed medications and modified reimbursement caps and authorization requirements for certain compounds and topicals. Within that adoption process, a pre-existing cap on manufactured topicals was inadvertently removed. MyMatrixx and our trade association (AAPAN) successfully encouraged the Commission to reinstate the cap to avoid the potential loophole and increased costs.
- The New York State Workers’ Compensation Board has discussed high-priced topical medications with the MyMatrixx Regulatory Affairs and Clinical teams, including available options under current Board regulations and the prior authorization and valuation objection processes. While other topics, including notable workers’ comp legislation, have taken priority, the Board placed the drug formulary and medical treatment guidelines on its published regulatory agenda to eventually open them up to changes with input from stakeholders.
- Legislation in Pennsylvania was introduced to address “excessive costs” for topical and compounded medications in the state’s workers’ comp system. The bill would add caps on compounds and topicals based on certain dollar amounts (like other states have adopted) and incorporate the Federal Upper Limit as part of a “lesser of” reimbursement methodology in capping non-compound topical drugs.
- The Texas Division of Workers’ Compensation (DWC) decided to review and evaluate the appropriateness and medical necessity for prescribing topical analgesics as part of its 2026 Annual Audit Plan and sought input from stakeholders. In July, the DWC solicited input for its draft audit plan, accepting comments through early August.
Topical medications remain topical
While states are turning to regulatory actions to address the utilization of and channels for dispensing high-cost topical medications, there is still more work to do. MyMatrixx will continue to engage with states and workers’ compensation industry advocates on this important topic.
MyMatrixx clients seeking information on their own experience with topical medications should reach out to their MyMatrixx account team. Send your regulatory or public policy questions on this topic or others to our Regulatory Affairs team at MMXRegulatoryAffairs@MyMatrixx.com. For more information on policy developments in workers’ compensation impacting pharmacy across the country, please visit and bookmark Statehouse Watch at MyMatrixx.com.
This article is for general informational purposes only and does not constitute legal advice. Applicable requirements may vary by jurisdiction and are subject to change.
1. Thumula V, Liu TC, Wang D. Interstate Variation and Trends in Workers’ Compensation Drug Payments, 6th Edition: A WCRI FlashReport. Workers Compensation Research Institute; May 2026. FR-26-02. Accessed August 20, 2026. https://www.wcrinet.org/reports/interstate-variation-and-trends-in-workers-compensation-drug-payments-6th-editiona-wcri-flashreport/
Upcoming webinar on topical medications:
The Trials and Tribulations of Topicals in Workers’ Compensation Claims
MyMatrixx experts Adam Fowler (Director, Regulatory Affairs) and Alan Rook (Senior Clinical Account Executive) will be joining Lisa Anne Hurt-Forsythe (Vice President of Government Affairs, AAPAN) to present on this “topical” topic at the IAIABC 112th Convention in Spokane, Washington on September 30, 2026, in a panel titled “The Trials and Tribulations of Topicals in Workers’ Compensation Claims.” More information on this event can be viewed here.