Insight, analysis & opinion from Joe Paduda


Work comp pharmacy – the latest scam

Gotta hand it to those…”entrepreneurs”, they are one creative bunch. One day it’s repackaging drugs at hugely inflated prices, then compounding drugs (oops, how’d that turn out??), next its some bizarre new way to measure muscular strength.  That good ‘ol American in-ja-noo-ity sure found a home in work comp!

Here’s the latest example…stick with me here folks, this is probably happening to you too…

PMSI, through its PBM Tmesys, has received claims for Voltaren Gel 1% in 100gm tubes billed using a NDC indicating it was a repackaged medication (NDC 35356-0187-03).

Since that’s how Voltaren Gel comes from the manufacturer, the good folk at PMSI found it a bit odd that the drug was “repackaged” and assigned a NDC different than the manufacturer’s NDC.

So, PMSI contacted the repackager (LAKE ERIE MEDICAL AND SURGICAL SUPPLY) to gain additional information as to what they are repackaging. As it turns out, LAKE ERIE MEDICAL AND SURGICAL SUPPLY is taking the manufacturer’s product, relabeling with a LAKE ERIE MEDICAL AND SURGICAL SUPPLY proprietary label, assigning a new NDC and AWP (the new AWP being 2.8 times that of the manufacturer AWP) and selling the relabeled product to physicians within and outside of New York for physician dispensing.

side note – Lake Erie is the top repackager used by Automated Healthcare Solutions, the physician dispensing “technology” firm/lobbying powerhouse.

From a brief, very un-scientific poll of a few friends at payers, it turns out transactions for this “repackaged” product are relatively common, most (if not all) coming from a pharmacy in Flushing NY.

Also, you have to ask yourself why are they doing this?  My guess is that this pharmacy figured out that the margins are better if they process this as a repackaged drug than as a typical dispensed item.

It caused some of PMSI’s folks to wonder just how it works.  Are they squeezing out the gel and putting it into tiny tubes?  Turns out they are just putting a new label on it.  So the plan works like this:

a)      Get a cheap tube of a drug.

b)      Take the tube and do nothing to it.  File for a new NDC.

c)       Get the new NDC – create your own expensive AWP.

d)      Put new label over old label – charge a lot more money.

Michael Rosenblum (a PMSI VP and pharmacist, and the one who figured this out) tells me that normally this drug comes in packages of 3.  So maybe what these guys are doing is breaking the package up as single tubes, creating a new NDC, slapping a new label on it, and charging the same price for one tube as would be charged for 3 tubes…

To quote another PMSI exec, it “Looks like a crazy system has gone insane.  In the case of Voltaren Gel, the act of putting a new label increased the cost 2.8 times the original cost.”

Not crazy, just another day at the office in the work comp world…

What does this mean for you?

Check those NDCs now, stop paying the inflated prices now, demand refunds for any bills already paid, and get your SIU on this now.

3 thoughts on “Work comp pharmacy – the latest scam”

  1. Straight from their website… I believe the last two statements are ironic and really capture it all. Thanks for the post Joe!

    “Lake Erie Wholesale Medical is a leader in the medical supply industry with a vast array of products, experience, and excellent customer service. We are part of a large buyers network with access to a complete line of supplies and products. We provide competitive prices and excellent customer service. Finally, we have several unique products that are only available through us.”

  2. Joe,

    Here is a new ploy that has crossed my desk; that a UDM certain company, I won’t mention names, is also getting on the money train of physcian dispensing.

    I just heard that pain docs are being approached about prescribing drug testing on ALL of their patients! They are given free testing supplies, testing equipment and training on how to bill for the largest return.

    UDM is an important aspect of pharmacy cost containment but it is not needed in every case. This is just another example of (over-)utilization to net profits instead of best outcomes. Payers beware…

  3. @TomBlackwell, luckily with the new CMS changes the routine drug screens are a per patient encounter and if performed in the physician’s office only return approx. $25.00. If they’re performing the drug screen correctly, they should be determining if the IW is even taking the medications, or taking excessive.

    My issue / question is, what can we do with providers who are billing Repackaged NDCs, is paid to the lowest paying NDC, and then dispute indicating that it should have been another NDC, and it’s clear that they are selecting the NDC that returns the highest per pill price?

    And/Or billing a Medicare NDC, that is blatantly clear they’re selecting the highest paying AWP NDC that is on the DWC site. How do we know for sure which manufacture they go through for their “bulk” purchase?

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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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