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Why are drug dispensing firms supporting fee schedules for doc dispensed drugs?

Doc-dispensing firms have their minions out and about in multiple state capitols, using their dollars to buy lobbying prowess and support pliable politicians (talking about you, Clayton Hee in Hawai’i).

What’s different these days is they are supporting fee schedules in many jurisdictions – Hawai’i and Maryland being two.

Why?  Well, you could ask drug dispensing “technology” firm AHCS’ Board Member Hilary Grove. She’s with ABRY, the private equity firm that owns AHCS; shoot her an email at  Please.

Or you could track their recent activities.  Such as:

  • they’re getting in to the drug compounding business – actually they’ve been doing that for a while. There are at least two compounding pharmacies affiliated with AHCS or AHCS personnel – Compound Care Pharmacy Rx (which appears to be owned by AHCS) and ezCompound Rx, which has the same attorney as AHCS listed as their “correspondent”.

    No surprise there, as compounded drugs are becoming much more common in work comp, despite no credible research suggesting it is appropriate for the vast majority of patients. Compounds are very, very, profitable… 

  • they’re working with very small drug “manufacturers” who can “manufacture” drugs, file their own drug code (NDC) and price (AWP). Remember, in many states, WC fee schedules for repackaged drugs are based on the original manufacturer’s AWP – which is nothing more than whatever number the “manufacturer” wants to use, and bears NO relation to the ACTUAL price dispensing docs pay for the drugs.This is pretty clever as it essentially eliminates the price controls put in place by many states and allows dispensers and their enablers to continue making huge profits for their owners.

Alas, many payers are still focused on controlling the price of the pill or compound, a strategy that is obviously fundamentally flawed as it’s really easy to circumvent.  And ignores the research that demonstrates dispensing actually increases indemnity expense, keeps patients out of work longer, and increases other medical costs, thereby increasing employers’ and taxpayers’ costs.

Doc dispensing is a billion-dollar business.  It is maturing, getting smarter, and figuring out ways to sustain and grow its revenue. And work comp payers are not even close to keeping up.

What does this mean for you?

Doc dispensing increases loss costs about 3 percent.

How much premium do you have to sell to earn profits equal to 3 percent of loss costs?

That’s what this is costing you.


3 thoughts on “Why are drug dispensing firms supporting fee schedules for doc dispensed drugs?”

  1. My question is – with the latest hoopla over compounding pharmacies involved with execution drugs & the information all over the newspapers about how ‘no one knows what’s in the drugs we’re trying to kill people with’ – do you see this having any effect at all in states like FL (WC) where we’re trying to say just that?

  2. Got a bill a few weeks ago from a “drug dispensing technology firm” resubmitting with the “original manufacturer” NDC for Tramadol 150 mg. The per unit AWP is $10.74 per pill. The “manufacturer” is KLE2 (aparently they serve the physician dispensing market exclusively). So, at the proposed fee shedule, this physician-dispensed prescription for 270 pills would cost employers and taxpayers $4,059.72 (AWP + 40%). Bycomparison, the most commonly dispensed Tramadol is 50mg, AWP $0.81 per pill x 3 (to get the 150 mg)= $2.43 x 270 pills + 40%: = $918.54 for the same prescription.
    …Original manufacturer AWP (for physician dispensing) : the new high!

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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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