Sacramento, CA - Despite a decline since 2013, pharmaceutical costs for California workers' compensation indemnity claims at six months post injury increased by 217% over a ten-year period from 2005 through 2014. For claims lasting ten years or more, drugs account for 37% of all medical costs, contributing to California's rank as the state with the longest durations for workers' compensation claims in the nation.2
Although many factors have contributed to the long-term escalation of workers' compensation drug costs, there are concerns in California as well as in other states about the possible impact of physician drug dispensing. This concern stems from a potential incentive for physicians, some of whom have purchased drugs wholesale, to dispense drugs to injured workers and then charge for those drugs on a retail basis.
A 2006 study by the Commission on Health and Safety and Workers' Compensation revealed that 50% of all drug payments were made to physicians dispensing repackaged drugs resulting in $223 million in additional costs to workers' compensation payers. This practice involved prescribing repackaged drugs at higher costs than the same drugs available at pharmacies.
Given that a 2002 Appellate Court Case in San Diego upheld physicians' right to dispense drugs, the California Division of Workers' Compensation addressed this issue in March 2007 through an administrative regulation which equalized payment levels for repackaged physician-dispensed drugs and drugs dispensed by pharmacies. This change appeared to reduce physician dispensing for some drugs while opening the door for dispensing of compounds not covered by the California Medi-Cal-based pharmacy fee schedule applicable to pharmaceuticals in the California system.
To update the situation, the WCIRB has released a new report entitled Patterns of Drug Dispensing in California Workers Compensation, which analyzed $500 million in workers' compensation pharmaceutical payments from July 2012 through December 2015. WCIRB researchers used reported medical payment data representing more than 90% of the California workers' compensation insurance market.
This study shows that the share of pharmacy payments directly to dispensing physicians dropped by 20% over the 42-month period. Given that the unit amounts paid to physicians remained at consistent levels during this period, the reduction in providers' share of overall drug payments was driven by a lower number of prescriptions or utilization.
This decline in payments made to dispensing physicians occurred across all major types of drugs and was especially apparent for opiate analgesics, the most prominent type of workers' compensation drug. For base substances used for compound drugs, the share paid directly to physician dispensers decreased by approximately 50%.
Despite the overall drop in payment shares, physicians received higher per transaction reimbursements for specific drugs, including some opiate analgesics and stomach discomfort medications. In addition, provider physicians generally dispensed the most expensive drugs within these categories, although lower cost therapeutic equivalents were often available in pharmacies.
These results help explain WCIRB findings showing a 28% reduction in drug spending per claim from the second half of 2012 through the second half of 2015. This trend may be attributed to many factors, including the introduction of Independent Medical Review and the greater attention across the country as to the potential overuse of opiates. This study suggests that the reduction in drug payments to physician dispensers may be another underlying factor in the overall decline in drug costs per claim over the last several years. Read More...