A Healthesystems publication

Fall 2013

Regulation Alone Won't Control Physician Dispensing

Prescribers are already exploiting loopholes in legislation enacted to curtail the practice of physician dispensing.  Physician dispensing and repackaged drugs are among the many hidden factors that significantly drive up pharmacy costs in workers’ compensation when not identified and managed effectively.

As more states enact rules to prohibit or limit the practice of physician dispensing or put fee schedules in place to regulate pricing, it is easy for workers’ compensation payers in affected states to feel secure that regulators have successfully addressed the matter. Unfortunately, physician dispensing is a moving target that payers and PBMs need to stay ahead of as the market responds to changing rules. Healthesystems has been tracking physician dispensing since 2009 and continues those efforts. Recent data indicate that key players in some markets are exploiting legislative loopholes.

The State of Texas prohibits physician dispensing in all but a few well-defined circumstances. Physicians and physician groups have exploited loopholes to open pharmacies in their buildings and dispense repackaged drugs at a significant mark-up over the average wholesale price (AWP). This practice is legal but skirts the intent of the law.  

The Market Responds

The physician dispensing marketers are entrepreneurs, adept at finding ways around new state laws. They market turnkey dispensing services to physicians’ offices under the auspices of patient convenience and safety, but increased revenues for physicians is a main marketing theme. These companies offer the convenience of repackaged drugs and computer programs to automate the dispensing process and required record keeping needed to comply with state pharmacy dispensing laws. Because injured workers have no out-of-pocket costs for their care, the companies can mark up the drugs, even when price caps are instituted by state regulations.

When prescription drugs — repackaged or otherwise — are adjudicated outside of the PBM environment, it not only runs up the cost of claims, but can also subject patients to health risks. By keeping an eye trained on physician dispensing practices, workers’ compensation payers and PBMs can achieve better results for injured workers and lower pharmacy spending.

Vigilance Needed

More often than not, the charges for physician-dispensed repackaged drugs are billed on paper along with physician services. As such, they are not usually adjudicated in the PBM environment and can escape a number of drug utilization edits that could catch drug-drug interactions and therapy duplications. Controlling the costs and risks associated with physician dispensing requires a dynamic solution that can capture and adjudicate charges in a PBM environment. Vigilant monitoring of new rules and the market’s response to them is vital so programs can be adjusted.

Few payers and PBMs have what is needed to properly address the situation since each state has its own set of rules. When physician dispensing is not well managed, costs continue spiraling out of control — both in financial terms and risks to patient safety. Innovative technology is needed to blend clinical expertise and complex logic to track physician dispensing trends. Managing physician dispensing is part of Healthesystems’ ongoing efforts to increase pharmacy savings and achieve better treatment outcomes by maximizing opportunities in the clinical environment. 

Possible Options

When presented with claims involving problematic physician dispensing, claims professionals can exercise several options.

 

Top Physician-Dispensed Drugs1  

Drug Avg. % of Savings from Billed Amount Through Proper Adjudication
1Hydrocodone/Acetaminophen  9.6%
2 Ibuprofen 13.3% 
3 Meloxicam 6% 
4 Tramadol 7% 
5 Cyclobenzaprine  12% 
6 Gabapentin  5.1% 
7 Oxycodone/Acetaminophen 8.6

A 2013 WCRI report listed the five drugs most commonly dispensed by physicians48. Healthesystems’ experience is similar but included gabapentin and oxycodone/acetaminophen in place of Ibuprofen and cyclobenzaprine.  When system logic and edits that incorporate state-specific regulations and fee schedules were applied to this group. Overall, Healthesystems has successfully reduced the cost of repackaged drugs on average up to 70 percent. 

The Cost of Physician Dispensing

Physician-dispensed drugs may represent only a small portion of the total medical spend in workers’ compensation but the dollars are significant and so are the potential savings if managed properly.  From 2010-2011, physician dispensing accounted for an estimated one in six prescriptions written for workers’ compensation patients.  Five states — California, Florida, Connecticut, Illinois and Maryland — accounted for the highest prevalence of physician dispensing and spending on physician-dispensed drugs.2

Repackaging and physician dispensing are among the many hidden factors that significantly drive up pharmacy costs in workers’ compensation when they are not identified and managed effectively. 

 

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SOURCES

1 -Healthesystems proprietary data, 2010-2012.
2 -Wang D. The Prevalence and Costs of Physician-Dispensed Drugs, Workers’ Compensation Research Institute. September 2013.
3 -Wang D. The Prevalence and Costs of Physician-Dispensed Drugs, Workers’ Compensation Research Institute. September 2013.
4 -Wang D. The Prevalence and Costs of Physician-Dispensed Drugs, Workers’ Compensation Research Institute. September 2013.
5 -Lipton B, Laws C, Li L. Workers’ compensation prescription drug study: 2011 Update. NCCI Research Brief, NCCI Holdings, Inc. August 2011.
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