California: Insurers say workers' comp legislation will drive up pharmacy costs
The Association of California Insurance Companies is urging lawmakers to oppose A.B. 2593, introduced in February by Assemblyman Steve Bradford, D-Inglewood. The legislation, which is scheduled to be heard by the Assembly Committee on Insurance, would de-link the state's official medical fee schedule for pharmacy services from the Medi-Cal schedule for pharmacy reimbursement. Medi-Cal is California's Medicaid program administered by the state's Department of Health Care Services and the Centers for Medicare & Medicaid Services.
"The bill would replace this easily understood fee schedule with a convoluted system of various pricing options that could result in increased workers' compensation cost," said Mark Sektnan, vice president of the ACIC.
Moreover, Sektnan said the bill ignores significant issues that are increasing workers' comp pharmacy costs in the state, including the use of compound drugs and third-party companies that bill insurers for drugs at more than the rate negotiated between pharmacy companies and insurers.
Sektnan said there is clear evidence of a sharp increase in workers' comp pharmacy costs. He pointed to a 2009 study by the California Workers' Compensation Institute that compared first-year prescriptions and pharmaceutical payments for claims from accident year 2002 to 2007. Researchers found that the average number of prescriptions per claim rose steadily from 3.3 in 2002 to 5 in 2007 -- up nearly 52 percent over the six-year span. At the same time, average first-year prescription payments jumped from $269.05 to $461.90, or nearly 72 percent. Overall, the study found that for the post-reform period of 2005 to 2007, the average number of first-year prescriptions per claim was up 25 percent while first-year prescription drug payments per claim rose 35.6 percent.
Sektnan said that these increasing costs cannot be adequately controlled by adjustments to the fee schedule. Effective containment of pharmacy costs, according to the ACIC, requires more substantive reforms, including "a prohibition against the practice of drug compounding as a means to avoid the fee schedule; and a requirement that third-party firms bill at the pre-negotiated contract rate when billing for accounts they were assigned through a purchase."
"The inclusion of these provisions in A.B. 2593 would provide relief from some of the easily identifiable inflationary drivers of pharmacy costs," he said. "ACIC believes that A.B. 2593 provides an excellent opportunity to have a meaningful dialogue on pharmacy costs and we urge consideration of amendments that would achieve significant constraints on costs."
Bradford disagreed with the group's assertions. He said it is essential to de-link the pharmacy reimbursement rates from the Medi-Cal system because the state's budgetary problems have in the past, and may again in the future, force cuts to Medi-Cal rates that have nothing to do with a reasonable reimbursement rate for workers' comp pharmacy services. In addition, he said that, due to litigation, the primary source for determining average wholesale price is being eliminated, so the "time is right to address the link between Medi-Cal and workers' compensation pharmacy reimbursement rates."
CompPharma, an association of pharmaceutical benefit managers, supports the legislation, arguing that the bill would stabilize the reimbursement rates paid for pharmacy services in the workers' comp system, which would enable its members to better invest in cost-saving technologies.
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June 21, 2010
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