Mike Whitely of WorkCompCentral’s article [sub req] on Florida Governor Charlie Crist’s veto of the bill limiting reimbursement for physician-dispensed repackaged drugs illustrates just how confusing the weird world of work comp can be to the uninitiated – like Mr Crist.
For those unfamiliar with repackaged drugs, here’s a quick primer.
First, recall drug costs in comp are driven more by utilization than by price, except in instances like this where price gouging is rampant.
Work comp drug fee schedules peg the amount paid for drugs to a multiple of AWP (except CA, which uses Medi-Cal); Florida’s is set at 100% of AWP plus a $4.18 dispensing fee for both generics and brand drugs. (As I’ve noted previously, there are major issues with the use of AWP.) But AWP is based on the drug’s NDC number, a code that can be created by the wholesaler. Thus, if a company wants to buy a million 800 mg ibuprofen tablets and repackage them into lots of 27, it can create it’s own NDC, and thus set its own AWP.
CWCI (California) research showed that the repackaged drug ranitidine (generic Zantac) was priced at $255.56 for 150 mg. pills, compared to a retail pharmacy’s cost of $25.90 and Drugstore.com’s $19.71; the difference in markup on the ingredient cost between physician dispensing and pharmacy dispensing was about 1700%. Naproxyn (Aleve) markup averaged 1000%, Vicodin 750%.
Since California figured out how to prevent entrepreneurs making a fortune by repackaging drugs, the repackagers moved into other states. Florida is the current target; the latest Survey of Prescription Drug Management in Workers Comp indicated this is also a big problem in the upper midwest and southwest. Some states, including Texas and New York, specifically prohibit physician dispensing.
Florida’s drug costs were recently analyzed by WCRI, which reported:
“…the average payment per claim for prescription drugs in Florida’s workers’ compensation system was $565–38 percent higher than the median of the study states.
The main reason for the higher prescription costs in Florida was that some physicians wrote prescriptions and dispensed the prescribed medications directly to their patients. [emphasis added] When physicians dispensed prescription drugs, they often were paid much more than pharmacies for the same prescription.
The WCRI study, Prescription Benchmarks for Florida, found that some Florida physicians wrote prescriptions more often for certain drugs that were especially profitable. For example, Carisoprodol (Soma®, a muscle relaxant) was prescribed for 11 percent of the Florida injured workers with prescriptions, compared to 2 to 4 percent in most other study states.
Financial incentives may help explain more frequent prescription of the drug, as the study suggested. The price per pill paid to Florida physician dispensers for Carisoprodol was 4 times higher than if the same prescription was filled at pharmacies in the state. [emphasis added]
The study reported that the average number of prescriptions per claim in Florida was 17 percent higher than in the median state. [emphasis added] Similar results can be seen in the average number of pills per claim.”
Physician dispensing is not all bad; there’s something to be said for ensuring the patient receives the right drug on the way out of the office, improving compliance and reducing the patient’s hassle factor.
Crist, who is going to be running as an Independent for re-election this fall, may have bowed to pressure from lobbyists working for physicians and repackagers. He certainly wasn’t trying to ingratiate himself with business; several larger employers were reportedly behind the measure.

So, what do you do about this?
Some payers are rewriting their provider contracts to specifically ban physician dispensing. Others are unilaterally cutting reimbursement to the ‘non-repackaged’ level. Another tactic is to notify contracted physicians that no new patients will be directed to them if they bill for repackaged drugs.
As Florida is an employer-direction state, payers have a lot of control and influence over physicians.
Use it.

CompPharma LLC, a consortium of workers comp PBMs, has just published a glossary of terms commonly used in the comp pharmacy business, the press release is here and the glossary, which entitled CompPharmaPedia, is here.
Why a glossary?
Several reasons.
Regulators and legislators are working feverishly to figure out what they will use as a basis for their pharmacy fee schedules when AWP is no longer published by First DataBank. While they are working on fees, they may well want to tweak other provisions of the comp code; CompPharmaPedia can help provide a standard definition of terms so stakeholders have a consistent understanding of what, for example, a ‘claim’ is.
(in comp, a claim is the injury and all the activity surrounding that activity; in group and governmental programs a claim is the bill for a specific medical procedure(s) or prescription or service)
Many payers are looking to improve the results of their pharmacy programs, and there’s a good deal of confusion out there as different PBMs use different definitions in their reports and marketing literature. CompPharmaPedia is an attempt at standardization, so payers can do the proverbial “apples to apples” comparison.
Researchers are looking deeper into comp pharmacy, and CompPharmaPedia should help them use standardized terms to improve understanding across the entire community.
A couple of disclaimers.
CompPharmaPedia is a service; there is no ‘requirement’ that PBMs, or anyone else, use the definitions. PBMs may and some likely will continue to use their own definitions.
CompPharmaPedia is also a work-in-progress, and will evolve as the comp pharmacy business does. Expect more terms to be added and current definitions to be ‘tweaked’.
(Note – CompPharma is owned by myself and Helen Knight.)

The decrease in the workers comp drug cost inflation rate that persisted for five years appears to be over. According to HSA’s Sixth Annual Survey of Prescription Drug Management in Workers Compensation, the five-year ‘decrease in the rate of drug cost increase’ is over, as drug costs across the industry were up 7.5% in 2008, compared to 7.7% the year before.
Workers comp payers, including large and mid-tier insurers and TPAs, are increasingly knowledgeable about drug costs, utilization, drug management approaches and programs, and cost drivers. However, while some are quite sophisticated, a few continue to exhibit little understanding of this cost area; unsurprisingly these are the payers with the highest drug cost inflation rates.
In contrast to prior years, the drug cost inflation rate tended to be lower at smaller payers than their larger competitors, as smaller payers seem to be ‘faster to market’ with utilization controls, adjuster education, and data sharing with their PBM partners.
Once again, utilization is seen as the key driver, with respondents citing over-prescribing, over-use of pain medications, and physician prescribing patterns as key reasons for cost increases.
The recent URAC initiative to ‘certify’ work comp PBMs met with mixed reviews; twice as many respondents considered URAC certification ‘not important at all’ as viewed it as ‘extremely important’.
To combat cost inflation, savvy payers are increasing their investment in data mining and analytics, adopting step therapy programs, enforcing mandatory generics, and calling on their PBMs to provide clinical support for drug management. Payers are more knowledgeable about and ‘on top of’ their drug cost and utilization data, with most having ready access to generic fill rates, generic efficiency, network penetration, price changes, and other summary information. First fill capture statistics are also more widely captured, as payers seek to gain control over drug usage as early in the claim cycle as possible.
Continuing a five year trend, no one PBM has established a dominant position in the market as the leading PBM. However, PBMs are all rated much higher than Third Party Billers.
In partnership with the good people at WorkCompCentral, I’ll be providing an overview of the most recent findings from the in a webinar scheduled for Tuesday, January 12 from 1:00 – 2:00 pm eastern. The cost for the webinar is $149.
Webinar registrants will receive a copy of the Survey results, to register click here and enter the code ‘Hsarx’.
The public version of the Survey will be released on Monday, January 18. If you would like a copy, email info AT healthstrategyassoc DOT com. Seminar participants will receive a separate, detailed version of the Survey.

The five year downward trend in drug cost inflation appears to be over, driven by excessive utilization, pain management, and price increases on a couple key drugs. But not all payers are experiencing increased costs; some actually saw costs decline in 2008, due to strong clinical management, a solid understanding of underlying cost drivers, and a willingness to engage with treating physicians.
Those are among the findings of the Sixth Annual Survey of Prescription Drug Management in Workers Comp, completed late last year.
In partnership with the good people at WorkCompCentral, I’ll be providing an overview of the most recent findings from the in a webinar scheduled for Tuesday, January 12 from 1:00 – 2:00 pm eastern. The cost for the webinar is $149.
Webinar registrants will receive a copy of the Survey results, to register click here and enter the code ‘Hsarx’.

In 2004, California implemented a set of far-reaching reforms to its workers comp system, including several specifically aimed at cutting medical costs. One of the more drastic changes changed the pharmacy fee schedule from one based on a significant multiple of AWP to one tied directly to the Medi-Cal fee schedule (California’s name for the state Medicaid program). Medi-Cal’s fee schedule is actually lower than most comp PBMs’ contracted rates with retail pharmacy chains; as a result most PBMs are ‘under water’ on their business in California or are at best at break-even.
While medical costs have come down dramatically after reform, especially in physical medicine, that has not been the case for pharmaceutical expenses.
In fact, costs increased significantly, driven by significant increases in both the average number of prescriptions per claim and the average payments per claim for prescriptions. In addition, payments for Schedule II narcotics, categorized as having a high potential for abuse and addiction, increased nine-fold after reform. Schedule II drugs are also strongly associated with extended disability duration, driving up both medical and indemnity costs.
According to the California Workers Compensation Institute, the average number of first-year prescriptions per claim increased 25 percent after the implementation of the Medi-Cal link, while the average drug cost per claim went up 37 percent. (Changes in Pharmaceutical Utilization and Reimbursement in the California Workers’ Compensation System, September 2009)
The problem with physician repackaging/dispensing has largely been addressed, yet costs continue to escalate. From conversations with PBMs that dominate the state, it is clear that California’s reimbursement levels don’t allow them to invest in utilization management and clinical programs, both of which are keys to controlling total drug cost. Studies conducted by NCCI clearly indicate the primary importance of utilization as the driver of comp drug costs; surveys conducted by my firm have confirmed this as well, as those payers focused on managing utilization have seen their drug costs drop while payers without strong utilization controls consistently see drug cost inflation rates well above average.
Clearly, the linkage to Medi-Cal has not reduced drug costs for California’s employers.
What does this mean for you?
If California doesn’t rethink its approach to drug fee schedules, expect your costs to continue to increase.