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UPDATE – Repackaging drugs in comp; the wild west indeed!

Update – parts of this post may be incorrect or mischaracterize the nature of AHCS’ business. I’m trying to get AHCS to respond to my request for information and help me better understand their business model.
Original post follows
It’s amazing what you can find out about a company these days. After my post on drug repackager Automated Healthcare Solutions last week, a couple calls inspired me to do a bit more checking.
First, how does AHCS make its money? Simple – by taking advantage of a loophole in workers comp drug fee schedules to bill exorbitant amounts for drugs, bills insurers and employers are required to pay.
An audit of Miami-Dade County Public Schools’ workers comp program determined AHCS-affiliate Prescription Partners, LLC was paid over a quarter million dollars for drugs in 2008. That’s a lot of money, but even more striking is the average cost per script; Prescription Partners; average script was $423.25, by far the highest per script cost of any supplier. Miami-Dade’s PBM had an average cost of $188.52.
Let’s talk specifics. An analysis of pharmacy data indicated Prescription Partners, LLC (AHCS billing entity) bills from 125% to 720% of fee schedule for the same drugs, with an average of about 175%. Yes, that’s right – AHCS was paid up to 6 times more than the fee schedule amount. The loophole lies in the way prices are set for drugs. As a repackager, AHCS can set its own price for drugs; repackagers are considered ‘manufacturers’ by the rate publishers and thus determine what the Average Wholesale Price is for the medications they sell.
In theory, AHCS, and other repackagers for that matter, could set their prices at a million bucks a pill. Given the rampant greed exemplified by some (again, not all) of these folks, it’s a bit surprising this hasn’t happened yet.
Its not as if AHCS or the physician practices dispensing their drugs are adding six times’ more value to the injured worker. While there is some benefit in ensuring the patient gets their drug quickly, it’s hard to see how that is worth the huge extra cost. Unless you happen to be one of AHCS’ owners, that is.
Turns out a Boston-based private equity firm bought a minority stake in AHCS earlier this year. I don’t know the folks at ABRY Partners, but I’m kinda wondering if they did their due diligence before plopping down their millions.
For example.
Gerald Glass advertises himself as a ‘medical doctor’. Which he isn’t. Glass, Founder and ‘Co-CEO’, claims he got a medical degree from Windsor University, a Caribbean academic institution. However, I found no evidence that Glass had ever been licensed as a physician in the US…
A little more investigation confirmed that AHCS was a major, if not THE MAJOR, contributor to the GOP in Florida. (this may well have occurred after ABRY’s investment) An article in the Florida Independent noted the following:
” June 16, three LLCs — Durable Medical, Orthopaedic Fellowship Group and Green Solar Transportation — with the same managers as the founders and co-CEOs of Automated Healthcare, Paul Zimmerman, M.D., and Gerald Glass, M.D., donated $500,000 to the Florida Liberty Fund. On June 22, $487,000 was transferred to the Florida First Initiative. Automated Healthcare LLC also donated $100,000 to the Florida Liberty Fund on Aug. 3; on Aug. 5, $124,000 was transferred to FFI. (Automated Healthcare did not respond to a request for comment.
H.B. 5603, a bill vetoed by Gov. Crist but supported by Florida CFO and Democratic candidate for governor Alex Sink, included provisions aiming to reduce the cost of prescription drugs in the state’s worker-compensation program. Automated Healthcare opposes the legislation, since it would likely cut into their business.”
So, less than a month after Crist vetoed a bill that would have killed AHCS’ business in Florida, AHCS contributes $600,000 to a PAC that supports Crist.
Loyal readers may recall my article last week noted AHCS gave a hundred thousand bucks to the Florida Liberty Fund; shame on me for not knowing the total was much closer to six hundred thousand dollars…
What does this all add up to?
Some repackagers are raping the system. This is nothing less than legalized theft. It is growing rapidly, and payers, and most importantly regulators, have to act.

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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