Monday, March 12, 2012

Florida Employers: Fight Back on Repackaged Drugs

Now that AHCS has won the day in Florida, it's time for the state's employers to fight fire with fire. Clearly, the proposed amendments to SB 668 (offering rebates and rate roll backs) were not at all a genuine attempt at political compromise, but rather an intentional obfuscation of the process intended to stall the bill in committee. Bad outcome, but solid strategy. So what to do?

First, leverage utilization review to ensure the drugs being dispensed are, in fact, medically necessary. If not, stop paying. If they are, explore following the lead of the Miami-Dade School System (and a few other fed up employers) that may have figured out another potential solution.

According to a workcompcentral article from February 24, "Florida Statute 440.13 (12) establishes the current fee cap, but allows carriers to contract for a lower amount. The statute also allows carriers to pay contract amounts even if a provider is not a party to a contract... In October 2010, after Crist vetoed the first repackaging price cap, Miami-Dade Public Schools cited that section of the workers' compensation law and refused to pay repackaged drug prices for its 48,000 workers."

Here's how this works: An injured worker gets hurt and sees a doctor. The doctor prescribes and dispenses a drug, then makes up an NDC code, marks it up 300%, and bills the insurer. However, if a retail pharmacy, under contract with the insurer, is reasonably accessible for the injured worker, the insurer can re-price the drug to the contracted rate. I've talked to the Florida DWC about the definition of "reasonably accessible" - candidly, they're not really sure what would hold up in court.

This strategy is not without risk, but it might be worth a try for an employer tired of paying way too much and willing to put some legal dollars behind what is sure to be a well-financed fight with the likes of AHCS.

On Twitter @PRIUM1


  1. Michael Gavin, I am appalled by the inaccuracy of information that you have provided in this article. As a "Chief Marketing Officer" what basis and qualifications do you have to write such misinformation to get all of your readers worked up into a frenzy? I am the Executive Director of a large Orthopaedic practice in Florida who has dispensed medications to Work Comp patients for more than a decade. We have always maintained a "middle of the road" approach to how we dispense, what we dispense and which repack company we use for our medications. Again, we have always remained at the low to medium level for the reimbursement that we receive which is tied to the NDC number you report in your article. What you don't accurately report here is that it is the drug companies that establish the NDC# on a medication and not the physician. The markup of 300% you report is also grossly inaccurate and represents only a very few companies or physician offices who are taking advantage of the system. What you also don't report is that most physician offices, including ours, only dispense generic medications vs. brand drugs which tends to keep the cost of the medication down for employers and payors. What you also don't report is that compliance with medications prescribed and dispensed at the physician's office is at its highest which results in less time away from work and lower costs to the employer. What you also don't report is that the average cost differential between medications dispensed out of a physician's office vs. a retail pharmacy is approx. $15 when you factor the mix of generics and brand name drugs which are prescribed by many physicians who do not dispense meds in their office. The reality is that medication dispensing is not the reason for the increases in work comp premiums, this is only an easy justification for carriers to increase their premiums for increased profits. The reality to the larger picture in healthcare, which impacts the work comp industry, is that the continued squeezing of money in the form of lower reimbursements to physician offices, especially those who go out of their way to see work comp patients who are challenging to begin with, which often requires numerous forms to complete and the added benefit of legal representation which again adds to the complexity of this type of patient, means that fewer docs in the future will treat this population. It also means that more doctors will look for other practice alternatives to offset the challenges of running a practice such as hospital employment which is the biggest trend occurring in healthcare today. As of the end of 2011 there has been a 305% increase in the number of physicians being employed by hospitals vs. staying in private practice. My point here is.. just wait until you see how much it cost to receive those same services in a hospital setting vs. an outpatient office like most patients are treated today. It is very easy to bash physicians over issues such as this one but there are many other variables and consequences that most people don't realize when stark changes are made and government gets involved with mandated rules and programs that only address one side of the equation. Thank you for your time and consideration.

    1. Kevin – Thanks for the comment. I’ll leave aside your question of my qualifications and stick to the data. I will point out, though, that most of my readers are already in “a frenzy” regarding this issue – and I would blame the Florida State legislature before I took aim at this blog.

      Let me start by pointing out that, under current state law, physician dispensing is neither illegal nor unethical. And if your practice is among the those that dispense medications responsibly, that’s great. Keep up the good work. Remember that the intent of SB 668 was not to eliminate the practice of physician dispensing, but simply cap the prices charged to the state fee schedule. Even I can admit that there may be an appropriate time and place for physician dispensing – I simply support eliminating the financial incentive to do so.

      To the facts:
      You point out that the “it is the drug companies that establish the NDC number on a medication, not the physician.” Drug companies do establish what are called “original manufacturer NDC numbers,” but repackaging companies and physician dispensers often establish new NDC numbers in order to escape being held to the average wholesale price (AWP) of the original NDC. If you’re not doing this, great. Kudos for you. But physician practices do it all the time. Just ask AHCS. The practice is detailed in the workcompcentral article here.

      You note that “the markup of 300% [I] report is also grossly inaccurate.” Not so. The National Council on Compensation Insurance (NCCI) reports that “markup on Florida repackaged drugs ranges up to 679 percent above the same drug in a non-repackaged format.” I simply picked an approximate midpoint between 0 and 679 percent to illustrate the process. You can find a link to the NCCI testimony and reporting regarding SB 668 here.

      You point out that “the average cost differential between medications dispensed out of a physician’s office vs. a retail pharmacy is approximately $15.” I’d love to see the data on that. Can you share it via a link like the ones I provide above? Building on this seemingly anecdotal point, you suggest that physician dispensed meds aren’t “the reason for the increases in work comp premiums.” I never suggested that this issue is anything other than one among many cost drivers that could easily be eliminated by capping the price of repackaged drugs.

      Finally, you site a 305% increase (I’ll have to take your word for it) in the number of physicians being employed by hospitals and suggest that costs will dramatically increase as a result of services being delivered in an inpatient environment. Nothing could be further from the truth. Not too long ago, I was in the business of advising hospital CEOs on the purchase of private physician practices. Hospitals are buying physician practices and employing ever greater numbers of physicians for the express purpose of delivering MORE care in the outpatient environment, not less. Your view of the evolution of outpatient care is entirely inconsistent with reality.

      Bottom line: I understand your practice, like many others, is likely under financial pressure to produce greater and greater levels of revenue. I can appreciate the difficult position you’re in. But I don’t think that gives you, or any other practice, the right to charge exorbitant fees for dispensing medications. Sounds to me like your practice isn’t charging such fees – that’s great. I’m curious, though… do you dispense medications to group health and Medicare patients, too? Or just work comp?

  2. Michael - thanks for educating this obviously uninformed provider.

    what the provider does not address is the patient safety issue: as they do not know what other meds the claimant is taking they may well cause harm by dispensing directly to the claimant.