Insurance legislators to focus on physician dispensing repackaged drugs

One of the emerging cost drivers in the workers' comp system is repackaged drugs, mainly dispensed through physicians' offices. Estimates put the cost at between $700 million and $1 billion annually.

Florida lawmakers are considering legislation to limit reimbursements for repackaged or relabeled prescription drugs. Other states, including Maryland, South Carolina, and Georgia, are looking at the problem. Texas lawmakers considered a bill that would have overturned the ban on physician dispensing.

Repackaged drugs are pharmaceuticals purchased in bulk by drug repackagers. They are often sold at higher profits.

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In Florida, for example, reimbursement for prescription drugs is the average wholesale price plus a $4.18 dispensing fee, or contract rate, whichever is lower. Repackaged drugs are assigned a different AWP, which may be substantially higher than the manufacturer's AWP.

Critics say it is a hugely profitable industry that adds hundreds of millions of dollars to the workers' comp system unnecessarily. In a recent interview, Joseph Paduda, principal of Health Strategy Associates, said there is so much profit in the practice that the companies involved "will spend whatever it takes to keep their livelihood going."

State lawmakers will look at the issue when they gather for the spring meeting of the National Conference of Insurance Legislators in Mississippi. During its hourlong meeting, NCOIL's Workers' Compensation Insurance Committee will include a discussion of state physician dispensing and repackaged drug efforts.

Last November, NCOIL committee members chose it as one of the main cost-driving issues in the system warranting a close examination.

At the February meeting, members will hear from a broad spectrum of speakers, including:

Florida Insurance Commissioner Kevin McCarty will offer a regulator's perspective.
Insurance representatives from the American Insurance Association and the Property Casualty Insurers Association of American will offer their insights.
A representative from Concentra will provide the medical provider perspective.
The committee is also hoping to hear from someone from Automated Healthcare Solutions to get insight from the industry itself.

Following the spring meeting, NCOIL committee members will consider either developing model legislation for states in time for next November's meeting or may decide to continue exploring the issue.

Read more at the WorkersComp Forum homepage.

February 13, 2012

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