The regulators in NY have decided that drugs for work comp claims will be reimbursed at the Medicaid fee schedule plus a dispensing fee.
That is a huge change from the prior reimbursement level of usual and customary, which in the Rx world is defined as the actual cash price in that pharmacy for that drug on that day.
Here’s the legal language.
Section 440.5 Fee Schedule
1. The maximum reimbursement for prescription drugs in uncontroverted cases, including all brand name and generic drugs, shall be that set forth under the schedule for the New York State Medicaid program at the time the prescription drugs are provided, plus a dispensing fee of five dollars for generic drugs and four dollars for brand-name drugs. The maximum reimbursement for prescription drugs in controverted cases, including all brand name and generic drugs, shall be ten per cent more than that set forth under the schedule for the New York State Medicaid program at the time the prescription drugs are provided, plus a dispensing fee of seven dollars and fifty cents for generic drugs and six dollars for brand-name drugs.
Whether you are a payer, a pharmacy, a claimant, or a PBM, this is bad news.
Pharmacy reimbursement for WC is about to drop thru the floor. This may lead to pharmacies dropping out of the WC system (although not likely), and will certainly lead to lower revenues for pharmacists. Most pharmacies’ WC revenues amount to less than 2% of total script sales, so it won’t be a killer. But WC-specific pharmacies are in trouble.
When California implemented a similar fee schedule, it resulted in an attempted revolt by pharmacies, which went pretty much nowhere. However, the unintended consequence was a shift to physician-dispensed meds, which actually drove up total pharmacy costs.
If the pharmacies won’t play, claimants may have a tougher time getting scripts filled.
PBMs, who were looking at NY as a great potential market, will now be hard-pressed to make any margin on scripts there. The Medicaid rates are about the same as the many PBMs’ contract rates with pharmacies.
And without margin, PBMs will not be able to provide clinical management assistance and other resource-intensive services to payers.
Which means utilization may increase, thereby driving up total costs.
I’m not sure how to take this as anything other than an expression of pessimism about the possibility of cost controls.
If paying the Medicare rate only encourages utilization increases, what can we expect to work when it comes to drugs? And whatever that thing is that works, wouldn’t paying a reduced fee schedule (on par with other nations) also be a good idea?
Joe,
I agree with most of what you posted here, but I am confused by some of the things that are going on. Here in NY, with this fee schedules, it seems that the PBM’s are getting money behind closed doors from the carriers OR they are taking losses, which doesn’t make sense. You see, Express is paying their contracted pharmacies MORE than what the new Comp schedule pays. I believe Express Comp pays 14% below AWP for brands and that is more than what the fee schedule allows. How can they continue to do this unless they are being comoensated in the back end?
Also, how can the PBM’s accept these rates? Doesn’t it set up a dangerous precedent? We are already hearing of murmurs from the NYC teachers union of why the PBM’s can participate with this fee schedule for Worker’s Comp, and not for their members fee schedule. This will make havok for the PBM’s and the contracting pharmacies reimbursements. Why would the PBM’s do this?
Also, how does the PBM expect to make money with the Medicaid fee schedule once AMP comes into play this January? This will mean that utilization will increase more than ever. You will have pharmacist begging their local doctor’s to write for brands across the board (exactly opposite of what they do now). None of this makes sense. What’s your take on all this?
I dissagree that this is a bad news. Why do we need PBM’s? They’re just a third party making profits on Worker’s Compensation (WC). If pharmacies provide such good prices to WC through PBM’s why wouldn’t they do so without them? Besides, they’re already doing it for Medicaid, why not for WC?
Satenik,
Take a look at Joe’s survey on Prescription Drug Management in WC. He outlines that “the payers with the lowest rate of drug cost inflation (most of which saw their costs decrease) were much more focused on, and astute about, utilization control. These payers all but dismissed price, noting that real cost control only occurred after they implemented programs targeting utilization.” These programs are why we need PBMs.