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States take steps to restrict dispensing of drugs by physicians

Higher costs, medication coordination top concerns as legislative efforts continue


States are taking steps to rein in the repackaging of drugs by doctors who are dispensing them to injured workers at higher costs than pharmacies charge.

By banning or restricting physician dispensing the states hope to push prescription dispensing back to pharmacies and reduce disability periods.

Eight states have banned the practice, while 13 states have implemented pricing and other restrictions, according to CompPharma L.L.C., a consortium of pharmacy benefit managers (see map).

A 2012 Workers Compensation Research Institute study found that before California changed a fee schedule in 2007, physicians charged nearly double the price for the same drug obtained at a retail pharmacy.

But a February 2013 report by the California Workers' Compensation Institute found that as a result of the 2007 change, which made the prices doctors charged comparable to retail pricing, the volume and the cost of physician dispensing in California declined by 90%.

The CWCI report also showed that in 2011, the state's doctors still dispensed more than half of all prescriptions under workers compensation and that California's use of physician-dispensed drugs remains among the highest in the country.

That is problematic because physician dispensing is associated with higher medical and indemnity costs and longer periods of disability, according to the CWCI report.

“We don't know whether the injury is worse, but the data is clear that where the patient is getting medicine from the doctor, the cases are lasting longer. Clearly, it's not a process that's saving the system money,” said Salt Lake City-based Brian Allen, vice president of government affairs at Westerville, Ohio-based Progressive Medical Inc., a workers comp pharmacy benefit manager.

Michelle Weatherson, Fresno, Calif.-based director of the claims medical division at the California State Compensation Insurance Fund, the state's workers comp insurer, said the 2007 change “significantly improved the situation in California.”


In an analysis this year of its 2012 data, the insurer found that physicians dispense a relatively small percentage of medications prescribed to injured workers, and that 40% of that amount is the “first fill” — an initial 72-hour supply — given to the patient. First-fill prescriptions can improve compliance because they allow a one-on-one conversation with the doctor and get the medicine to the patient as soon as possible, providing support and potentially contributing to a good outcome, said Ms. Weatherson.

State Fund's analysis showed for the first fill and beyond, medical costs “were virtually the same” for State Fund, regardless of whether the drugs were physician-dispensed, but “it's a trend we're keeping an eye on because of past problems,” she said. The analysis focused on medical expense, the largest portion of costs in workers comp, and not total claims costs, she said.

In a recent effort focused on costs, the National Council of Insurance Legislators adopted a model law that ties reimbursement for physician repackaged prescription drugs to an original manufacturer's average wholesale price. Proposed amendments would cover the repackaging of over-the-counter products.

The model law is designed to limit pricing differentials between physician dispensing and retail pharmacy dispensing.

“Any state not currently limiting repricing would be helped by the model law,” said Progressive Medical's Mr. Allen.

The model law is similar to laws already adopted in several states to regulate repricing, said Kimberly George, senior vice president of managed care and client services at Sedgwick Claims Management Services Inc. in Chicago. With the support of the model law, “we are hopeful more states will regulate physician dispensing, but the states are slow to change,” she said.


But the model law has its limitations, said Joseph Paduda, principal at Health Strategy Associates L.L.C. in Madison, Conn.

“The model law doesn't do anything to stop physician dispensing, nor address the patient safety issue or the impact of physician dispensing in terms of impact on claims outcomes. It attacks the smallest part of the problem,” he said.

“What should happen is that physician dispensing should be banned unless it's for medications necessary to start immediately such as, potentially, antibiotics or life-saving drugs. None of the top physician-dispensed drugs falls into those categories,” Mr. Paduda said.

Mr. Allen said the model law “is really just directed at the cost of the medication. It's part of the battle but not the whole battle.”

Another issue that needs to be addressed is keeping prescriptions in a managed network, where they can be monitored for compliance, safety and effectiveness, which is what PBMs do, he said.

“Medications dispensed from a physician office are not part of the pharmacy benefit management program and, therefore, there is no cross-reference to other medications the patient may be taking,” Ms. George said.

But physician dispensing can have its medical and cost benefits for the patient and the health care system, if done properly, she said.

“Sedgwick and our PBM partners created a physician-dispensing medication formulary to address medications that are safe and convenient for the patient to receive in the physician office. Physician outcomes are scored in Sedgwick's five-star provider benchmarking program and, as deemed appropriate, we will enroll an occupational health physician into the pharmacy network as part of our outcomes-based quality care program and allow limited physician dispensing. Medications dispensed, quantities and price are agreed to within the network contracting,” Ms. George said.