Physician Dispensing Practice: a Major Concern for the Workers’ Compensation System

by | Published on Feb 14, 2018 | Workers Compensation

The workers’ compensation program that utilizes comprehensive medical record retrieval and review is a major lifeline for injured workers in the United States. However, controlling workers’ compensation costs has always remained a major challenge. Many factors contribute to increasing costs, and one such factor is physician dispensing of repackaged drugs. Physician dispensing involves doctors and small to medium health institutions directly offering their patients the medications they need. This enables the patients to return to their homes with the medications they need, thus avoiding additional trips to get their medications. From a workers’ compensation point of view, there are many pros and cons with regard to physician dispensing.

The practice of physician dispensing is advantageous because the physician can ensure the patient has the medication to begin treatment immediately. Besides, patients are saved a trip to a retail pharmacy. It is also beneficial for specific medications that require physician monitoring such as those drugs dispensed within a drug rehabilitation program. However, the disadvantages associated with this practice are more.

  • Patient safety is a major concern. Since there is no oversight of a pharmacy benefit manager/pharmacist, the physician must rely on the injured worker to provide his/her medication history for the purpose of drug utilization review. As a result, drug therapy problems may go undetected, leading to possible excessive/duplicate drug therapy, missed drug interactions and other medication concerns.
  • Increased costs: Most of the medications physicians dispense are associated with increased cost per unit because of the creation of a new NDC (National Drug Code) and AWP (Average Wholesale Price). The AWP is much higher, even as much as 400% higher, than the same drug dispensed via a retail/mail order pharmacy setting.
  • Bill review systems may find it difficult to identify physician dispensed drugs because they are often simply included in the physician’s treatment bill. The reviewer may not be able to distinguish the cost of treatment from that for drugs.

Many U.S. states have enacted reforms to control the high cost of drugs dispensed by physicians to injured workers. Twenty states have strictures for physician dispensing and most of the reforms target repackaged wholesale pricing of certain drugs and strengths. 8 states do not allow the practice. However, physicians are finding ways around these regulations, as experts point out. As a result, the costs remain stagnant or are increasing in some states. The latest study by the WCRI found that physician dispensers are trying to dispense in such a way that they can maintain their income by dispensing drugs of newer, more expensive strengths. For instance, a popular muscle relaxer that was available only in 5 mg and 10 mg strengths earlier is available at 7.5 mg now and has been identified as one of the drugs causing the costs to remain stagnant. The researchers analyzed data from 2011 to 2014 for 26 states and found that physicians dispensed fewer prescriptions after the states enacted reforms regulating prices for physician dispensed drugs. However, the practice was still prevalent in post-reform states – California, Illinois, Florida, Maryland and Pennsylvania witnessed 54% to 64% pharmaceutical costs coming from doctors who dispense drugs.

To counter this challenge posed by the physician dispensing system, the National Council of Insurance Legislators (NCOIL) is introducing their latest physician dispensing model law (a reintroduction of a 2013 model law) that signifies a new push to help educate state lawmakers on the importance of controlling drug costs for injured workers. This model law intends to re-establish clear guidelines for doctors with regard to reimbursement and drug dispensation and thereby reduce workers’ compensation insurance costs.

  • One component of this Act would allow an employer, their workers’ compensation insurer, or a designated third-party administrator to restrict reimbursement for pharmaceutical products to a directed network of preferred pharmaceutical providers, under certain conditions.
  • The Act would also limit physician-distributed drugs to no more than a first fill within 7 days from the date of injury.
  • Compound medications that require “a critical evaluation, physician documented medical necessity or utilization review for compounded pharmaceutical products prescribed for patients” will also be restricted.

The increase in the practice of physician dispensing remains a concern for workers’ compensation insurers and will require more scrutiny and more fastidious medical claims review. To control costs, the workers’ compensation industry must work with state legislators to provide more insight into this serious issue. The industry must remain informed regarding how physician dispensing is being handled by individual states. Joseph Paduda, Principal of Health Strategy Associates, a consulting firm for workers’ compensation managed care, feels that placing reimbursement limits per script or per ingredient, capping the number of ingredients or the total cost per script could help control escalating costs. Other options he suggests include — allowing employers a retrospective review with the option to deny coverage for a medication, allowing employers the ability to direct injured workers to a network of specified pharmacies, and allowing pre-authorization subject to certain requirements.

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