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Physician dispensing in comp – growth is exploding

In Illinois, physician dispensed drugs accounted for almost two-thirds of all drug costs in 2010-11. Same in Florida.
Maryland – 47%; Pennsylvania – 27%; Tennessee 25%; Michigan – 22%.
The data are from WCRI’s just-released study on Physician Dispensing in Workers Comp, and reveal growth in physician dispensing that can only be described as “explosive”.
In Illinois, physicians’ share of all prescription costs increased from 22 to 63 percent of all prescription payments over 07/08 to 10/11.
You read that right; growth tripled over three years.
Even more revealing, the volume of scripts dispensed by docs grew from 26% to 43%.
You read that right too. In Illinois, costs went up more than twice as fast than the number of scripts, which means the physicians dispensing medications raised their prices dramatically. A specific example; the price of Vicodin purchased at a retail pharmacy dropped 2 percent, while physician dispensed Vicodin went up 66% over that three-year period.
Notably, prices did not change much in Florida, perhaps as physician dispensing firms and repackagers, responding to heavy political pressure, kept a lid on pricing rather than face added scrutiny.
The study reported on physician dispensing across 23 states, representing over two-thirds of all work comp benefits in the nation.
A couple other points deserving of attention. First, proponents of physician dispensing claim lots of benefits including increased compliance, lower cost, and more rapid return to work. Note that they make these claims without a single shred of evidence to support those claims. Contrast that with the overwhelming evidence – in this and other reports from WCRI, NCCI, CWCI and other sources – that clearly demonstrate the exploding costs of this practice, costs that are borne by employers and taxpayers.
Second, these proponents assert that limiting reimbursement to the price of the non-repackaged drug will mean docs won’t dispense (and thus won’t deliver the “benefits” noted above). Not true.
California instituted price controls limiting reimbursement to the price of the non-repackaged drug several years ago; over half of all scripts California are still dispensed by physicians, just as they were pre-reform.
There’s much more in WCRI’s study; lead author Dongchun Wang points out that prescribing patterns for dispensing docs are dramatically different than non-dispensing physicians, and docs have dispensed OTC medications and charged much higher prices than retail pharmacies.
NCCI reported physician dispensed drugs accounted for 28% of all drug costs back in 2008. Now, three years later, it could well be that two-fifths of drug costs are from physician dispensed repackaged drugs.

3 thoughts on “Physician dispensing in comp – growth is exploding”

  1. I find it interesting that two of the states with the highest rates of opiate prescriptions per claim are New York and Massachusetts, both states that do not allow physician dispensing. It can be argued that physicians who dispense can monitor narcotic utilization better even if they do not follow the guidelines for follow up (urine testing/psych exam)

  2. Mark – thanks for the comment.
    Actually that can’t be argued, and I have no idea how one could make that connection.
    There’s no data to support your “argument”, while there is a plenitude of data supporting the observation that docs who dispense extend disability duration, overprescribe inappropriate drugs e.g. soma, and prescribe drugs that could be bought OTC at prices several multiples of the OTC price.

  3. Illinois is addressing the issue of physician dispensing at the upcoming Medical Fee Advisory Board next week. The Chairman has spent a fair amount of time listening to the payer community’s concerns and is actively seeking to begin controlling the costs while ensuring injured workers have adequate access to the necessary drugs. The medical community, especially in our more rural areas tell the Commission the reason for physician dispensing is because without it, there is less compliance by the injured worker in obtaining the prescriptions and/or the claims administrator doesn’t approve or pay timely so the injured worker is unable to obtain the necessary drugs. But for now, at least the Chairman is willing to look for a solution.

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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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