A Healthesystems publication

Fall 2011

Physician Dispensing of Repackaged Medications: A Legislative Challenge

Physician dispensing of medications has become a major cost driver of workers’ compensation medical costs

At the close of the 2010 Florida legislative session, lawmakers unanimously passed House Bill 5603, which would have controlled the high cost of physician dispensed repackaged medications provided to workers’ compensation claimants. The bill required repackaged drugs to be reimbursed using the National Drug Code (NDC) of the “original manufacturer.”

The passage of House Bill 5603 by the two houses of the legislature was not the end of this story. Governor Charlie Crist vetoed the bill, a move which received a significant amount of press throughout the insurance industry. Some stakeholders publicly questioned whether the veto was motivated by political contributions. Just months later, similar legislation was filed; again intending to control costs associated with repackaged drugs. Despite support from payers throughout the state, the 2011 legislative session closed without passing a single bill addressing the reimbursement of repackaged drugs. For Florida employers, change could not come sooner. During the week of October 24, 2011, Insurance Journal reported that Florida rate increases have been directly tied to repackaged drug costs.1

There is plenty of research published on the topic —reputable industry organizations such as the Workers’ Compensation Research Institute, the National Council on Compensation Insurance, and the California Workers’ Compensation Institute have all highlighted physician dispensed drugs as a major cost driver of medical costs. Physician dispensing, and specifically the lack of regulation around the reimbursement of these medications, has resulted in per pill charges that are sometimes several hundred percent more than the identical medications when dispensed by a pharmacy. In addition, physician dispensing can also contribute to over utilization of many types of medications, including opioids. Because these drugs are often billed on paper, they are not subject to prospective DUR and adjudication processes which are standard for point of sale prescription transactions.

Many states are challenged with finding a legislative solution to the costs associated with physician dispensing. In fact, of the relatively few states that have already adopted language addressing physician dispensed repackaged drugs, nearly all have done so through regulatory fee schedule changes — not legislation. Regulatory change may become more difficult in the future, as is evidenced by recent hearings in Maryland, Colorado and Tennessee. The repackaging industry has organized physicians to testify about the supposed benefits of physician dispensing, citing patient compliance, convenience and in some cases, improved patient outcomes, as ways to lower costs to payers.

When addressing the costs associated with physician dispensing, legislators must understand and focus on two of the main challenges: 1) excessive overcharging can definitely be considered price gouging; and 2) over utilization can place patients’ health and safety at risk. While the cost issue should not be ignored, especially when the cost differences between physician and pharmacy dispensed medications can be hundreds of percents higher, it is important to also understand the health risks associated with utilization patterns resulting from physician dispensing.

Due to the wide group of competing stakeholder’s business and financial interests involved, it is a difficult task for lawmakers to draft legislative language for physician dispensing that can be easily implemented and enforced. History has shown us that loopholes can be easily exploited but some states, such as Oklahoma, have done a good job adopting laws which leave very little room for loopholes. Either way, it is necessary for states to proactively address this growing trend, and Healthesystems will continue to be involved in educating and communicating with legislators in regards to this practice.



1 -http://www.insurancejournal.com/news/southeast/2011/10/25/221489.htm accessed October 31, 2011
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