Insight, analysis & opinion from Joe Paduda

< Back to Home


Why do docs dispense meds to work comp patients?

Yesterday’s  WCRI report on physician dispensing in Georgia post-reform is stuffed with insights into physician behavior and motivators thereof.

In April 2011, the Peach State capped the price of physician-dispensed repackaged drugs at the AWP of the original, non-repackaged drug, thereby eliminating the outrageous markups the docs and their enablers were charging employers and taxpayers.  WCRI examined prescribing behavior pre- and post-reform; here’s my take on the more interesting results;

  • Post-reform, drugs dispensed by docs were still substantially more expensive than the same pills from a pharmacy.
  • Dispensing docs are more likely than non-dispensing physicians to write scripts for Tylenol, ibuprofen, Aleve, and Prilosec – drugs that can be bought cheaply over the counter.
  • Prescribing patterns among dispensing docs changed post-reform to include more expensive versions of similar drugs
  • After reform, drugs dispensed by docs cost 20 – 40 percent more than the same drug bought at a pharmacy; likely because almost all payers use a PBM, which provides the payer with a big discount on drugs bought at a pharmacy. WCRI: “Because pharmacy benefit managers (PBMs) often contract with pharmacies for discounted prices below AWP, it would not be surprising to see that the pharmacy prices were, on average, lower than the prices paid to physician-dispensers for the same drug.”
  • As in California post-reform, the price cut by eliminating the up-charge for repackaged drugs did not significantly reduce dispensing; 35% of scripts were dispensed by docs before reform, 28 percent after.

So, what can we surmise from the data.  I’d suggest several one things.

  1. Dispensing docs do it for the money.  Duh. 

Despite all the BS about patient care, outcomes, convenience, and access, they do it for the dollars.

Here’s proof.

11 thoughts on “Why do docs dispense meds to work comp patients?”

  1. As with many things in WC, dispensing of drugs from the physicians’ offices began as a “good” thing, intended to help the injured workers. I managed a group of four industrial medical clinics in the early ’80s where we saw a combined total of about 400 patients on a normal day/evening. We dispensed the first fill of the pain medications (three days worth) from our clinics in order to allow the patient to began taking the medications without needing to stop by a pharmacy and wait to fill a prescription on their way home. Since they were in pain, many with lacerations and sprain/strains, this was a way of helping them out by eliminating one more stop for them. It wasn’t a way to make money for the clinics – our mark-up on the med’s was very low. They were also given a written prescription to fill in a few days. It’s sad that things such as this, that begin with the intention of helping the injured workers, turn into areas of abuse but I guess that’s our current system.

  2. The other issue is that there is a disconnect between the insurance carrier and the physician. Yes, the physician wants to make more money (don’t we all). His contact is the in-house dispensing sales rep to gives the pitch that ‘the carrier is paying for it anyway’ and implies (or directly states) that the doc is just making the profit the drug store was going to make. Like the rest of us, the doctor has heard about the high profit margin that the drug manufacture makes, so the high prices the dispensing rep is offering seem plausible.

    If doesn’t do a whole lot of good for those in the industry to tell each other about the exhorbidant costs of inhouse dispensing. The carriers need to educate the physicians.

    1. I’m going to go out on a limb and say that many, if not most, doctors who dispense meds from their office are aware that the costs to the payer are significantly higher than what the costs would be if the meds were dispensed from the pharmacy. There may be a few exceptions but greed, and not naivety, is the primary issue here.

  3. Proof is also in Florida where a bill was passed to reign in exaggerated physician dispensing fees, but then they rewarded them by paying them AWP +12.5% and an $8.00 dispense fee, and my guess is an office visit fee on top of that. But, if it is dispensed in a retail pharmacy, they are reimbursed at AWP + a $4.18 dispense fee. Apparently, it costs more to dispense in a physicians office that in a retail pharmacy, or a pharmcists time is less valuable than a physicians? Will it ever end?

  4. Here’s an extreme example of the difference in pricing of physician dispensed medication vs pharmacy dispensed meds. I’m looking at a case in which the claimant filled a script for Tramadol 50 mg at a Walmart in HI for $4.00 in Oct of 2012. In Dec of 2012 the same script for Tramadol was filled at an ortho’s office in HI via “Prescription Partners” for $131.91.

  5. Thank goodness that the motivations of WC Payers are pure. Question: Why is OK for an insurance company to be profitable (I am guessing they have rent, payroll, expenses, overhead, etc.) while doctor offices are considered bad if they need to generate a profit to take care of their patients.

    1. Scott – thanks for the note. Several responses. First, I don’t see that impugning insurers is a winning argument for profiteering physicians.

      Second, If you have followed physician dispensing’s history and read dispensing companies’ websites, you will note that the profits are egregious.

      moreover, they come at the expense of patient safety, often include drugs which have no place in workers’ comp, drive up employers’ and taxpayers’ costs, and, research clearly demonstrates, are associated with longer disability duration and higher costs – worse outcomes.

      No one, least of all me, has any problem with profit in medicine. when it violates the AMA’s own code of ethics, methinks there’s a problem.

  6. On a related note, perhaps the WC carriers should take a look at which physicians are billing for high level E/M visits while documenting only low level visits. I’m quite sure the carriers are overpaying for this as well.

  7. The reality is that wc patients require more provider time with depositions, paperwork, staff fighting for authorizations, not being able to send many claims electronically, etc. Of course dispensing is profit guided on their behalf but I don’t know one physician that would choose a comp patient over a commercial insurance. Their getting all they can for the aggravation

    1. Carson – thanks for the comment.

      re WC reimbursement for physicians, there is no question WC is more complex and complicated; that’s why reimbursement is higher in almost all jurisdictions (see WCRI’s just released report for details on this, link and discussion of the report is on this blog).

      That said, in some states – Connecticut, Wisconsin for example – WC is a GREAT payer and providers love the business. And for hospitals, WC is by far the most profitable payer out there.

      Finally, physician dispensing is just plain bad.

Comments are closed.

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.



© Joe Paduda 2019. We encourage links to any material on this page. Fair use excerpts of material written by Joe Paduda may be used with attribution to Joe Paduda, Managed Care Matters.

Note: Some material on this page may be excerpted from other sources. In such cases, copyright is retained by the respective authors of those sources.