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Docs as drug dealers

One of the emerging issues in workers comp is the dispensing of drugs by physicians on a grand scale. Clients (big WC payers) are seeing over half of their drug costs in California coming from doc-dispensed drugs. While that sounds great; injured workers get their meds quickly and without having to drive to a store and argue with a clerk over who pays, there are a few problems – and a couple really really big problems.
Drugs are reimbursed according to a fee schedule in work comp in many states. But, the fee schedule only applies to drugs that are “standard”; i.e. have an NDC number. So, when the fee schedule was slashed in CA two years ago creative capitalists simply repackaged the drugs, which now did not have an NDC number and therefore no state-set fee (showing the futility of price controls).
Actually, there is no state set fee, but there is a reimbursement methodology that results in drug costs much higher than the “regular” drug packages. CA law required payers to pay for these repackaged drugs according to the old OMFS fee schedule. And this is one generous fee schedule – 140% of AWP plus a $7.50 dispensing fee for generics and 110% plus $4 for brand. The margins on this for docs must be amazing.
BY way of reference, the new WC drug fee schedule in CA is about 90% of AWP…
Lesson here is price fixing creates opportunities for creative entrepreneurs; my bet is while this gaming has been going on, drug utilization in California WC has been increasing.
What does this mean for you?
If you are a WC payer in California, headaches (that may get treated with doc-dispensed drugs!).

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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