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State price caps help limit workers compensation costs

State price caps help limit  workers compensation costs

Pharmacy benefit managers have limited ability to help workers compensation payers address rising costs caused by the steady increase of doctors dispensing repackaged medicines from their offices.

Experts say that's why introducing price caps through state medical or pharmaceutical fee schedule reforms is the only surefire way to stop workers comp cost increases that are driven by doctors dispensing prescription drugs at higher prices than retail pharmacies.

The price caps already introduced in several states, including Arizona, California, Georgia and Tennessee, limit the price doctors can charge when they dispense prescription drugs.

The caps bring the price physicians charge in line with lower prices typically charged for the same prescription medications at retail pharmacies, said Jim Andrews, senior vp of pharmacy services at Healthcare Solutions Inc., a Duluth, Ga.-based pharmacy benefit manager specializing in workers comp.

“In my opinion, (a fee schedule price cap) is the best, immediate, most far-reaching solution states can do to create economic parity between repackaged and nonrepackaged drugs,” Mr. Andrews said.

Repackaging refers to physicians' practice of dispensing prescription medications after the drugs have been bought in bulk.

Data show doctor dispensing is more expensive in states without price caps. The price per pill for medications most commonly dispensed by doctors was often 60% to 300% greater, on average, than the price for the same drug dispensed at a retail pharmacy, according to a study released in June by the Cambridge, Mass.-based Workers Compensation Research Institute.


The study, Physician Dispensing in Workers' Compensation, relied on data from 5.7 million prescriptions paid under 758,000 workers comp claims in 23 states from 2007 to 2011. For example, the price of a Prilosec OTC pill at a well-known retail pharmacy chain was 64 cents per pill, on average, but the WCRI study found doctors were charging $5 to $8 per pill.

The study concluded that the prices of doctor-dispensed pharmaceuticals increased rapidly along with the practice of doctor dispensing in states allowing it. Researchers found that in Illinois, for example, the share of doctor-dispensed prescriptions for injured workers rose to 43% from 26% during the four-year period studied. Meanwhile, the dollar share for those medications increased even more, to 63% from 22% of all workers comp prescription payments in Illinois.

In Florida, meanwhile, doctors' share of drugs dispensed for injured workers grew to 45% from 35%, while their share of prescription payments rose to 62% from 43% during the study period.

Nonetheless, WCRI's study of physician drug dispensing has come under fire.

“The so-called study is no more than a whitewash manufactured by the insurance industry, and it's not surprising that this unscholarly work was the vehicle being used to deliver a self-serving message,” said a spokeswoman for Miramar, Fla.-based Automated HealthCare Solutions, which provides doctors with pharmaceutical dispensing technology.

Controversy aside, measures that pharmacy benefit managers can take to help workers comp payers control repackaging charges require the cooperation of the pharmacy benefits managers' customers and medical providers, Mr. Andrews said.


In one growing trend, what are know as electronic bridges can be set up between a doctor and a payer's pharmacy benefit manager so the doctor's billing for the drugs reaches the pharmacy benefit manager directly, Mr. Andrews said. A pharmacy benefit manager then can apply its electronic claims review process to analyze a doctor's billing to assure the physician complies with existing state billing regulations and formularies that “support medical treatment guidelines,” he said.

This automated billing and claims review process also lessens a payer's administrative workflow, taking thousands of paper transactions off of an adjuster's desk, Mr. Andrews said.

However, taking advantage of an electronic bridge is limited to payers who contract with a doctor network in which participating physicians agree to certain concessions.

“Unfortunately, PBMs are hamstrung by regulation, and the solution to the physician dispensing issue relies on regulation and legislation,” said Joe Paduda, president of CompPharma L.L.C., a workers comp pharmacy benefit manager consortium. “There is really not much of anything PBMs can do. In many cases, the PBMs don't even see the (doctor) bills.”

In cases when pharmacy benefit managers do see a doctor's billing for repackaged medicines, they can work with payers and claims adjusters in an attempt to educate patients about the advantages of using a pharmacy benefit manager and retail pharmacies, said Beth Kuschner, a clinical pharmacist for Progressive Medical Inc., a Westerville, Ohio-based PBM.

For example, retail pharmacies can provide safety checks, such as assuring that a prescribed drug does not negatively interact with other medications prescribed for patients.


Pharmacy benefit managers also can attempt to encourage doctors to join cooperating networks, Ms. Kuschner said. But those options are limited, she said.

Therefore, Progressive Medical and other pharmacy benefit managers are representing claims payers and pharmacies in lobbying state legislators nationwide to limit physician reimbursements for repackaged medications, said Brian Allen, Progressive Medical's vp of government affairs.

“Payers are being harmed by physician dispensing,” Mr. Allen said.

“It's not so much that physician dispensing of medications is bad. It's just the pricing for repackaged medications they are passing on to payers is extraordinarily high compared to what happens in a pharmacy.”

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