Florida's physician dispensing legislation gets lukewarm reception
After about half a decade, the legislature passed and sent to Gov. Scott legislation that would seemingly put an end to concerns about the higher priced pharmaceuticals.
But representatives of the insurer and pharmacy benefit manager communities are less than thrilled with the legislation. At best, they say it ends the fight and provides some certainty about the reimbursements. But they also say it may increase physician behavior in terms of dispensing medications and result in higher costs to the workers' comp system.
Supporters of the practice say provider dispensing of medications directly to patients results in greater compliance in taking the prescribed medication, more convenience for patients living in remote areas, and prompt treatment. Some opponents dispute those assertions and say there is evidence the practice results in longer disability durations and higher costs to the workers' comp system.
They cite a recent study by the California Workers' Compensation Institute that associated physician dispensing of repackaged drugs with higher medical and indemnity costs and delayed return to work. It said each physician dispensed repackaged drug added $545 to the average medical benefit costs, a 17 percent difference.
Medication prices are typically determined based on the National Drug Code, a universal product identifier for the medication and the manufacturer or repackager. In Florida, the reimbursement rate for prescription medications is the average wholesale price of the drug plus $4.18 for the dispensing fee, unless the carrier has contracted for a lower amount.
Repackaged drugs have been purchased in bulk by a wholesaler or repackager from a manufacturer, relabeled and repackaged into individual prescription sizes that can be dispensed directly by physicians or pharmacies to patients.
"Although drug repackagers do not alter the drugs, they do sell them in different quantities," according to an analysis of the Florida legislation on the Florida General Assembly's website. "By repackaging a drug, a new NDC is created and a new AWP is assigned to the repackaged drug."
The analysis noted that a recent study by the Workers Compensation Research Institute said the prices paid to physician dispensers for many common drugs were 40 percent to 80 percent higher than what was paid to pharmacies for the same prescriptions.
Florida situation. In response to complaints by workers' comp payers in Florida, former Chief Financial Officer Alex Sink in 2009 issued an informational bulletin. The bulletin noted there appeared to be no specific provision in Florida statutes addressing the issue. However, it cited statute 440.13(12)(c) which says:
"As to reimbursement for a prescription medication, the reimbursement amount for a prescription shall be the average wholesale price plus $4.18 for the dispensing fee, except where the carrier has contracted for a lower amount. Fees for pharmaceuticals and pharmaceutical services shall be reimbursable at the applicable fee schedule amount. Where the employer or carrier has contracted for such services and the employer elects to obtain them through a provider not a party to the contract, the carrier shall reimburse at the schedule, negotiated, or contract price, whichever is lower."
The legal term for the practice, privity of contract, essentially means in this case that even though a physician is not directly a signatory to a contract between the carrier and pharmacy, the physician is nevertheless bound by the contract. The physician, therefore, can be reimbursed based on the contract with the pharmacy.
"That is the reason there are 10,000 to 15,000 invoices in [Jeff] Atwater's office disputed," said Joseph Paduda, principal of Health Strategy Associates. Atwater is Florida's chief financial officer. "Payers say 'it is repackaged, we are applying and repricing what we would have paid at a retail pharmacy. So essentially, we can apply our contracted rate, whatever that is, to this repackaged drug which is nine times more expensive.'"
Paduda, an outspoken critic of physician dispensing, will address the issue during the National Workers' Compensation and Disability ConferenceŽ & Expo, produced by LRP Publications. He says because of privity of contact some carriers are paying a lower rate for physician-dispensed drugs. While the new legislation will define rates for physician-dispensed medications, the rates will, in many cases, end up being much higher.
"The legislation also eliminates the privity of contract, so it forces payers to reimburse physicians at a significantly higher amount than the [state] fee schedule," Paduda said. "They applied the network discount rate, which is below the fee schedule. Now they are going to have to pay above the fee schedule."
Representatives of the insurance industry were taking something of a wait-and-see attitude toward the legislation. "Insofar as it ends the perennial fight with drug repackaging providers, and we are being told it is rate neutral, we accept it as a compromise," said Donovan Brown, counsel for state government relations with the Property Casualty Insurers Association of America. "But we remain cautious on a prospective basis as it relates to physician behavior."
Brown said PCI will monitor the situation to see if there is an increase in physician dispensing, if the legislation is implemented. "I think we will see that with next year's rate filing from NCCI."
By Nancy Grover
Read more at the WorkersComp Forum homepage.
June 17, 2013
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