What Are Medical Foods and How Do They Affect Costs?

Workers' comp experts might not be familiar with medical foods, but they could be a major cost driver of workers' comp medical expenses.

A study developed by the California Workers' Compensation Institute showed medical foods may account for a significant amount of the medical dollars spent on that state's injured workers. But the lack of regulatory oversight, questions about their effectiveness, and the opportunity for abuse are raising a few eyebrows.

What are they? Loosely translated, medical foods are supplements for people with particular medical conditions. They were first developed decades ago to help people with specific genetic diseases who couldn't handle certain nutrients.

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The Food and Drug Administration defines medical foods as "a food which is formulated to be consumed or administered internally under the supervision of a physician and which is intended for the specific dietary management of a disease or condition for which distinctive nutritional requirements, based on recognized scientific principles, are established by medical evaluation."

They are not "normal" foods in that they must be specially formulated and processed rather than naturally occurring. Also, they are developed to have health-promoting or disease-preventing benefits beyond basic nutrition.

Why the concern? As the CWCI study noted, medical foods are now broadly dispensed directly from doctors' offices. These foods, in addition to compound drugs and convenience packs -- a drug and a medical food dispensed as a single unit, accounted for nearly 12 percent of the total dollars billed as medications in the California workers' comp system in the first quarter of 2009.

Medical foods do not need to be approved or registered with the FDA. Nor do the labeling requirements for nutrient content claims and health claims apply to them.

"Medical foods are in a limbo, gray area. Because they are not technically drugs, they don't have a National Drug Codes number, so they are not categorized as a drug," said Joe Paduda, principal of Health Strategy Associates in Madison, Conn. "In states with pharmacy fee schedules, there is no fee schedule for them."

The presence of an NDC number on a product that is not a drug may be a "false or misleading representation," the study authors said. "Some medical foods that have been prescribed for injured workers have been billed under NDCs that have been assigned by a labeler."

"There's no way of knowing [how much is being spent on them] because there's no consistent way payers would capture the payments for them," Paduda said. "I'd venture a guess that there is significantly more payments and dollars for them than anyone suspects."

Another concern is the lack of scientific evidence about their effectiveness. "There's no information," Paduda said.

The increased use of medical foods, along with compound drugs and co-packs coincided with California's regulatory elimination of differential pricing for repackaged drugs in March 2007, the authors said. That raises the final concern.

Read more at the WorkersComp Forum homepage.

October 19, 2010

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