Florida's (Repackaged) Drug Problem

Thursday, June 3, 2010 | 0

By Joe Paduda
Health Strategy Associates

Mike Whiteley of WorkCompCentral's article on Florida Gov. Charlie Crist's veto of the bill limiting reimbursement for physician-dispensed repackaged drugs illustrates just how confusing the weird world of work comp can be to the uninitiated like Mr Crist.

For those unfamiliar with repackaged drugs, here's a quick primer.

First, recall drug costs in comp are driven more by utilization than by price, except in instances like this where price gouging is rampant.

Work comp drug fee schedules peg the amount paid for drugs to a multiple of average wholesale price (except California, which uses Medi-Cal); Florida's is set at 100% of AWP plus a $4.18 dispensing fee for both generics and brand drugs. (As I've noted previously, there are major issues with the use of AWP.) But AWP is based on the drug's NDC number, a code that can be created by the wholesaler. Thus, if a company wants to buy a million 800 mg ibuprofen tablets and repackage them into lots of 27, it can create it's own NDC, and thus set its own AWP.

California Workers Compensation Institute research showed that the repackaged drug ranitidine (generic Zantac) was priced at $255.56 for 150 mg. pills, compared to a retail pharmacy's cost of $25.90 and Drugstore.com's $19.71; the difference in markup on the ingredient cost between physician dispensing and pharmacy dispensing was about 1,700%. Naproxyn (Aleve) markup averaged 1000%, Vicodin 750%.

Since California figured out how to prevent entrepreneurs making a fortune by repackaging drugs, the repackagers moved into other states. Florida is the current target; the latest Survey of Prescription Drug Management in Workers Comp indicated this is also a big problem in the upper Midwest and Southwest. Some states, including Texas and New York, specifically prohibit physician dispensing.

Florida's drug costs were recently analyzed by the Workers' Compensation Research Institute (WCRI), which reported:

"...the average payment per claim for prescription drugs in Florida's workers' compensation system was $56538% higher than the median of the study states.

"The main reason for the higher prescription costs in Florida was that some physicians wrote prescriptions and dispensed the prescribed medications directly to their patients. [emphasis added] When physicians dispensed prescription drugs, they often were paid much more than pharmacies for the same prescription."

The WCRI study, Prescription Benchmarks for Florida, found that some Florida physicians wrote prescriptions more often for certain drugs that were especially profitable. For example, Carisoprodol (brand name Soma, a muscle relaxant) was prescribed for 11% of the Florida injured workers with prescriptions, compared to 2% to 4% in most other study states.

"Financial incentives may help explain more frequent prescription of the drug, as the study suggested. The price per pill paid to Florida physician dispensers for Carisoprodol was four times higher than if the same prescription was filled at pharmacies in the state.

The study reported that the average number of prescriptions per claim in Florida was 17% higher than in the median state. Similar results can be seen in the average number of pills per claim.

Physician dispensing is not all bad; there's something to be said for ensuring the patient receives the right drug on the way out of the office, improving compliance and reducing the patient's hassle factor.

Crist, who is going to be running as an Independent for re-election this fall, may have bowed to pressure from lobbyists working for physicians and repackagers. He certainly wasn't trying to ingratiate himself with business; several larger employers were reportedly behind the measure.

So, what do you do about this?

Some payers are rewriting their provider contracts to specifically ban physician dispensing. Others are unilaterally cutting reimbursement to the 'non-repackaged' level. Another tactic is to notify contracted physicians that no new patients will be directed to them if they bill for repackaged drugs.

As Florida is an employer-direction state, payers have a lot of control and influence over physicians.

Use it.