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By DAN REYNOLDS, senior editor of Risk & Insurance®

At first blush, Florida Gov. Charlie Crist's May veto of a bill that would have forced limits on what physicians in that state can charge for workers' compensation medicines could have been interpreted as an act of villainy.

But, remember this is the realm of workers' compensation reform, an area rife with the land mines of unintended consequences. Close one income spigot, or disenfranchise one special interest group through legislation, that maxim asserts, and the perceived losers will come roaring back with legal opinions and a deft new strategy to line their pockets, that will have the potential to make payers more miserable than they were before.

In California, for example, physician dispensation costs have been limited by statute, but that just spurred more activity from drug repackagers and compounders who sidestepped the original National Drug Code number that pharmacy benefit managers use to track pricing. Workers' compensation costs, pumped up by the use of pain medications in that state, are now spiking.

So Crist, saying the issue hadn't been vetted thoroughly enough, shot down House Bill 5603, which would have limited the cost of physician-dispensed workers' comp medications. The bill had been backed by Florida's Chief Financial Officer Alex Sink, whose office oversees Florida's division of workers' compensation.

Crist is running for the U.S. Senate and Sink would like to replace him as governor, so when she berated him for vetoing the bill, the swipe probably had a political element to it. That aside, some in the workers' compensation pharmacy management industry admit that Crist's veto may have had merits.

"I think the legislation is a good idea," said Kevin Tribout, the director of government affairs for PMSI, a Tampa-based workers' compensation third-party administrator. "I know what the division was trying to do, they were truly trying to address a problem that impacted the payers and employers in Florida.

"I think part of the governor's veto message was correct. It was something that was done at the last minute. Everybody didn't have time to address it or adjust to it or figure it out so I think that part of it was fair," Tribout said.

"There may be legitimate arguments in support of amending how repackaged drugs are reimbursed in Florida. That's a discussion that belongs in a public legislative forum," wrote Dr. Sandy Silverman, the president-elect of the Florida Society of Interventional Pain Physicians in a May 25 newsletter in which he called for the bill to be vetoed.

So where does that leave the issue? Florida certainly has a problem with its workers' compensation costs and sitting square in the middle of it is the issue of physician dispensation.

According to the Cambridge, Mass.-based Workers' Compensation Research Institute, workers' compensation pharmacy costs in Florida are high. A March study that sifted data from 160,000 claims in 16 states established that Florida's pharmacy spending per claim was 38 percent more than the median for the other 15 states in the study.

The study found that half of injured workers in Florida who were out of work more than seven days received medications directly from physicians, and that Florida and California (at approximately 80 percent each) led the pack in the percentage of claims with at least one prescription for injured workers who were out more than seven days.

The sleep aid Soma cost 392 percent more in Florida when dispensed by a physician instead of a pharmacy, the study found; Vicodin cost 109 percent more when dispensed by a physician; and Percocet cost 155 percent more when dispensed by a physician.

Amanda Vatter, an Orlando, Fla.-based assistant vice president with Gallagher Bassett Services Inc., said she was working with the Miami-Dade County Public Schools in an effort to get a grip on the school district's workers' comp pharmacy costs when she came to much the same conclusion.

She found that rather than submit the pharmacy costs as straight-up pharmacy billing, doctors were burying the inflated pharmacy costs in their medical bills.

"What are all these noncovered items? These are all pharmacy charges," Vatter recalls telling herself when she started sifting through the district's bills. "When it was like a $200 difference I was like, wait a minute, this is like robbery."

The Florida Medical Association, the medical trade group which lobbied against House Bill 5603 saying it created a hardship for physicians, didn't return calls requesting comment for this article.

The man Vatter was working with at Miami-Dade County Public Schools is Scott B. Clark, the district's risk and benefits officer. What Vatter and Clark discovered in trying to reach a cost-cutting solution was that the state's workers' compensation code allows employers that have agreements with pharmacy benefit managers to correct pharmacy costs based on the state's fee schedule, even if the drug is dispensed by a physician.

"Where the employer or carrier has contracted for such services and the employee elects to obtain them through a provider not party to the contract, the carrier shall reimburse at the schedule, negotiated or contract price, whichever is lower," according to the code for the fee schedule.

So what did Clark do? He checked his interpretation of the code with Florida's division of workers' compensation. Then Sink's office on August 12, 2009, issued an informational bulletin that reminded employers that they were free to do the very thing that Scott was considering.

Vatter said she sent letters to every physician in Clark's provider network telling them what they planned on doing.

"We expected that we were going to get nasty letters," Clark said. "We expected that physicians were going to come down and go to the school board meetings and protest and speak to the board members."

Guess what, nothing of the sort happened. "I have never gotten a negative phone call, I have never had a practitioner to my knowledge contact the school board and we have not had anybody drop out of the program," Clark said.

Part of the reason for that is that the school district Clark works for is the largest employer in Miami-Dade County and the second-largest employer in Florida. His district has a lot of buying power.

What Clark calls his pharmacy validation program allows him to adjust workers' comp pharmacy bills back to the state's agreed-upon price, regardless of where it was dispensed. Clark estimates that the program will save the district about $700,000 per year.

And Vatter said Gallagher Bassett clients statewide are now incorporating Clark's solution. She said some 500 Gallagher Bassett clients in Florida are using the pharmacy validation program.

Legislation is still needed, Vatter said, because there are many employers who don't have pharmacy benefit managers. "We still need a law that is clear in the state of Florida because if you don't have a company that is repricing it according to the (state) fee schedule you just have to pay it," Vatter said.

Clark said, "some of the smaller employers may get a lot of pushback and so we felt if the legislature adopted this law, then everybody was going to be on an even playing field."

Andrew Sabolic, the assistant director of the division of workers' compensation, said that his office worked to provide information to legislators who were writing House Bill 5603. He said with a new governor taking office in January, it's too early to say how long similar legislation might live on his or her desk.

"Although it is very difficult for me to predict whether the new CFO (chief financial officer) will advocate supporting that amendment, I can assure that the division will certainly brief the new administration about the issues related to this subject," Sabolic said.

Any legislation Florida might pass will have to be fine-toothed to really close the loop on inflated workers' compensation pharmacy costs because physician dispensation is only part of the problem.

Daryl Corr, the president of Healthesystems, a pharmacy benefit manager based in Tampa, said drug repackagers--companies that break down the original packaging of a drug into different quantities and repackage it--are proliferating in Florida. When repackaging occurs, the original National Drug Code of the drug that is repackaged is modified to a new number, while also assigning a new average wholesale price. In most cases the repackager sets the new average wholesale price to an inflated rate. The Florida fee schedule uses the average wholesale price as the pricing benchmark, therefore the end result is an inflated cost to the payer/employer.

Companies like Healthesystems, though, have the ability to identify these transactions and reprice them back to a comparable rate of the original drug. Unfortunately, there is no legislation in Florida to support this process like in some states. However, there has been recent legislative activity attempting to do so, Corr said.

"The second thing is the incentive for overprescribing," he said, citing some physicians' practice of being able to make more money by utilizing these repackaged sources.

As bad as the Workers' Compensation Research Institute data is for Florida, the repackaging issue leads Corr to believe that Florida's costs may be much higher. "Since many times these transactions are being miscoded and processed as a physician bill and not a pharmacy bill, WCRI may not receive them when the information is requested from the payer," Corr said. He said conversations are preliminary, but Healthesystems is trying to build constructive relationships with certain repackagers and physicians to see if they can be convinced to price their repackaged drugs more reasonably.

"Now we have to get realistic," Corr said, citing the current tone of dialogue between workers' comp cost managers and the medical industry in Florida. "Do you want to go to zero or do you want to make a little money?"

October 15, 2010

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