Insight, analysis & opinion from Joe Paduda


Work comp drug fee schedules – what’s going to happen?

No one knows just yet, not even the regulators and legislators who are the ones tasked with coming up with a mechanism to replace AWP – which is going away in less than eighteen months.
More accurately, the First Databank/Medispan version is going to disappear; the Redbook version will still be around.
One option is to use Redbook as the standard, and there are some indications from some states that they are looking at Redbook. But Redbook has its issues – folks who know more than I about these things say it is not updated as frequently as Bluebook, and while it covers more medications, this ‘delay’ may make it problematic for PBMs who may well get into disagreements with retail pharmacies over the reimbursement level.
Beyond that ‘quick fix’, here’s how the changes may roll out. States with fee schedules set by their legislatures may well find themselves hard-pressed to meet the deadline; some, like Texas, aren’t due to meet until 2011, and others have a rather full legislative agenda with a lot more important stuff to deal with than work comp drug fee schedules. Thus, it is entirely possible that some states may not be able to address the issue before the clock runs out.
In that case, PBMs and payers will likely have to use the last version of the FDB AWP file for repricing pharma bills. That’s fine if the delay in selecting a new benchmark is a matter of days or perhaps weeks, but if it goes much beyond that we’ll see problems as prices charged by pharmacies will change while the reimbursement levels don’t. Litigation will likely ensue…
States that manage fee schedules via regulatory process are (likely) going to be a bit better off, as these processes are not dependent on the legislative process and complications thereof. Several states are already carefully evaluating alternative methodologies, and from my interaction with a number of regulators at the IAIABC conference last month, they are goign about this thoughtfully and with their eyes and ears wide open.
The real risk is if fee schedules are changed to match the Medicaid reimbursement rates.
This would be a disaster, as it was in California when physician dispensing exploded, and drug costs actually increased after the fee schedule was linked to Medi-Cal. In NY, where the State also set WC reimbursement at Medicaid, every PBM sent letters to the Chairman of the Workers Comp Board relaying their intention to exit the state if rates were not revised. Fortunately for all parties, they were successful in their efforts.
Unlike workers comp, there is no eligibility problem with medicaid – all recipients have a card. The formulary and DUR processes are well known and electronically administered. In comp, many claimants don’t know who their PBM is, and the only drugs that are approvced have to be directly related to the occupational injury or illness. These are just a couple of the distinctions, but they serve to illustrate the fundamental, and real, differences between comp and Medicaid.
Stay tuned – it is likely the big group PBMs and payers will move to another pricing benchmark, and like it or not, that will become the de facto ‘standard’.

2 thoughts on “Work comp drug fee schedules – what’s going to happen?”

  1. Joe,
    I was surprised to read in your latest post that after the rates in CA were tied to Medi-Cal that “physician dispensing exploded”. Is that correct?

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Joe Paduda is the principal of Health Strategy Associates




A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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