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Despite law to control costs, Calif.'s compound drug payments rose 68%


Compound drug dispensing in California's workers compensation system fell by 35%, but the average per-prescription payment rose 68.2%, from $460 to $774, after implementation of a 2012 law aimed at controlling pharmaceutical compounding.

While the share of compound drugs dispensed within the state's workers comp system in contrast to all California workers comp prescriptions fell from 3.1% to 2%, the share of payments for all compound prescriptions within the system rose from 11.6% to 12.6%, according to a study report released Monday by the Oakland-based California Workers' Compensation Institute.

The study analyzed the impact of Assembly Bill 378, which took effect Jan. 1, 2012. CWCI's study measured the volume of compound drugs prescribed to injured workers and reimbursement amounts during the first half of 2011 compared with the first half of 2012.

The law “was designed to curb the increased use of and the rapidly growing costs associated with compounded pharmaceutical products in the California workers' compensation system,” according to the CWCI report titled “Current Trends in Compound Drug Utilization and Cost in the California Workers' Compensation System.”

Among other measures, the new law strengthened the state pharmacy fee schedule by requiring that compounding pharmacies or dispensing doctors must bill for compound drugs at the ingredient level with each ingredient identified by using an applicable National Drug Code.


But CWCI found that, during its study period, the average number of NDC ingredients within compound drugs provided for injured workers increased from 3.4 to 3.8, or 13%, while the average amount paid per ingredient shot up 49% to $202.67.

“In addition, there was a 25.5% increase in the quantity per NDC ingredient but virtually no change in the average days’ supply per compound drug prescription, suggesting that more potent compound drugs are being dispensed,” CWCI reported.

CWCI reported finding that the NDC category with the highest growth rate in both price and incidence of dispensing was dextromethorphan powder. It is a synthetic morphine derivative often used as a cough suppressant.

“This ingredient, which is also sometimes used for neuropathic pain management, has recently been linked to recreational drug use,” the CWCI said. “Within the study sample, this ingredient was found to be exclusively combined with antidepressants.”

To reach its conclusions, the CWCI evaluated a dataset of 586,575 compound and noncompound prescriptions resulting in $71 million in workers comp payments.

The study is available here.

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