WCRI Report – Physician Dispensing – Increases in Cost and Frequency in Workers’ Compensation

July 24, 2012

On July 19, WCRI (Workers’ Compensation Research Institute)  released its most recent study on the rapid growth of physician-dispensed pharmaceuticals for injured workers under state workers’ compensation.   The study compares 23 states, including Arkansas, Connecticut, Florida, Illinois, Indiana, Iowa, Louisiana, Maryland, Michigan, Minnesota, New Jersey, North Carolina, Pennsylvania, Virginia, and Wisconsin highlighting changes in patterns of dispensing, as well as changes in percent of market and pricing from 2007/2008 thru 2010/2011.

Increases in Frequency and Cost for Physician Dispensed Drugs

Key findings in WCRI’s study year over year include the following:

  1. Physician-dispensed drugs became increasingly common in most states that permit physician dispensing.   In Florida, Illinois, pre-reform Georgia, Maryland, Connecticut and post-reform Arizona and California, physicians dispensed 28-53 percent of all prescriptions, representing 28-63 percent of total spending on workers’ compensation claims.
  2. Prices paid for physician-dispensed drugs were substantially higher than if the same drugs were dispensed by a retail pharmacy.  In 2010/2011, the price / pill when dispensed by a physician was 60-300 percent higher than the same prescriptions dispensed at a retail pharmacy.
  3. Prices paid to dispensing physicians rose rapidly for medications that were commonly dispensed by physicians, while the prices paid to pharmacies for the same drugs changed little or fell.  As an example, Physician dispensed Vicodin, Mobic and Ultram, all commonly prescrbed in workers’ compensation, saw a average price increase of 52 percent while the same drugs dispensed in a retail pharmacy setting either remained at the same price or experienced a price decrease.
  4. Dispensing physicians wrote prescriptions for and dispensed certain drugs (e.g., omeprazole [Prilosec®] and ranitidine HCL [Zantac®]) that are available without a prescription in a drug or grocery store at a much lower price.   When they did so, prices were 5-15 times higher than MSP retail prices.

With this trend of increased price and frequency of physician dispensed drugs , it is no surprise that several states have either banned the practice altogether, have initiatives in place to limit or prohibit, or are in the process of implementing reforms directed at reducing the cost of physician dispensing. The study examined the results of specific state initiatives, as well as highlighting baseline data for states with legislation currently in play.

States That Prohibit Physician Dispensing

In the United States, five states have prohibited physicians from dispensing drugs in general, by law.  These include Massachusetts, New York, Texas and Montana and Utah.  The first three are included in the study.  In all other states, issues related to physician dispenisng are more or less addressed through state workers’ compensation policies on state fee schedules, which set maximum reimbursement rates for prescrption drugs dispensed at pharmacies and physician offices.

Where Physician Dispensing is ‘Allowed’

Several states allow physician dispensing, but in some states, such as Arkansas and Minnesota, medical practices appear to be restrictive.  Arkansas, physician dispensed drugs are subject to the same fee schedule as pharmacy dispensed drugs. In both settings, the provider (whether pharmacist or physician) is required to report acquisition cost, and physicians do not receive a dispensing fee for drugs dispensed from their offices.  In Minnesota, physicians are allowed to dispense, but must register with the Medical Practices Board before doing so.  The physician must also disclose to the patient that the he/she profits from the dispensing of medications, and that the patient may choose to obtain  prescriptions from another source.

Louisiana limits physician dispensing of narcotics to a 48-hour supply, but allows for non-narcotic drugs to be physician dispensed for longer periods.  In Florida, as of June, 2011, physicians are prohibited from dispensing Schedule II and Schedule III narcotics.

Five states (Arizona, California, Tennessee, South Carolina and Georgia), allow physician dispensing, but have adopted reforms intended to limit the price markups for physician dispensed prescriptions.  Also, in Illinois, one of the largest noted in the study for cost increases associated with physician dispensing, the Workers’ Compensation Commission members voted Tuesday, July 24, 2012,  to move ahead with a proposed rule to regulate the price of repackaged drugs, dispite a recommendation by the Medical Fee Advisory Board not to proceed.  For the rest of the states, policies are either permissive or silent as they relate to physician dispensing.

In the state of Florida, while physician dispensing is prohibited for Schedule II and Schedule III narcotics as of June, 2011, the study still showed that 62 percent of all prescription drug spending in  Florida for injured workers was paid to physicians for drugs dispensed at their  offices—not to pharmacies.  This doesn’t mean 62 percent of all prescriptions….just 62 percent of the cost.  That’s the issue.

Certain drugs were prescribed and dispensed by physicians in Florida that were  infrequently prescribed in other states where physician dispensing was not  common. For example, 11 percent of the injured workers in Florida received  prescriptions for either Prilosec® or Zantac® as compared to less than 2 percent  in most other states. When physicians dispensed, the average price paid per pill  was $7.07 for Prilosec® and $4.81 for Zantac®, compared to $0.64 and $0.42 per  pill when the same drug was purchased over-the-counter at Walgreens.

In other states that allow physician dispensing of all prescriptions, as a  result of drug repackaging, prices paid to physicians were  typically much higher than what was paid to pharmacies for the same drug. For  example, the price for the most commonly used drug, Vicodin®, more than doubled  when dispensed by physicians compared to the pharmacy—an average of $1.08 per  pill at the physicians’ offices versus $0.43 at the pharmacy.

“There is a great discrepancy between what doctors and pharmacies charge for  dispensing the same drug,” observed Dr. Richard Victor, WCRI’s Executive  Director. “One question for policymakers is whether the large price difference  paid when physicians dispense is justified by the benefits of physician  dispensing. Policymakers can learn from the California reform experience, which  is also analyzed in this study.”

Pricing at WC Fee Schedule – Lessons Learned in California

One of the key findings of the report, the results of the California fee schedule reforms (physicians who dispensed were required to submit and price using the same NDC  as that used in retail pharmacies), provided evidence of the impact of physician dispensing on the following:

  1. Prices paid for physician-dispensed prescriptions;
  2. Patient access to physician-dispensed prescriptions;
  3. Physician prescribing and dispensing patterns for certain drugs.

Approximately 1/2 of all drugs dispensed in CA remain as physician dispensed.  Following fee schedule reforms, however, the number of repackaged drugs dispensed in CA dropped from 43 percent to 11 percent.   In effect, the average price / pill for physician-dispensed prescriptions decreased to that for pharmacy-dispensed prescriptions.

State Initiatives to Control Growth and Manage Cost

States that have either implemented reforms similar to that of California over the past year, or have bills under debate currently include Arizona, California, Georgia, South Carolina, and Tennessee.  While the results of the legislative initiatives remain to be seen, California’s track record would lead us to believe that savings are possible if physicians are required to follow the same rules as their retail pharmacy counterparts when dispensing medications.

Impact on WCMSA Part D Cost Projection for Life Expectancy

As is the case in California and the other five states with reform initiatives onteh books, when physicians prescribe and dispense using the standard National Drug Code (NDC), pricing will occur at fee schedule or lower (if negotiated discounts are available).  From an MSA perspective, therefore, there are no objections to physician dispensing.  CMS Memos direct us to price at generic when available.   As such, when Tower identifies standard, commonly prescribed drugs being physician dispensed, we utilize the GCN (Generic Code Number) to determine therapeutic equivalency.  We then price at the lowest generic price available.

The Real Problem – Repackaging – Not Physician Dispensing

While physician dispensing is getting criticized, I would clarify that it is the process of repackaging medications that can be bought at much lower prices, and the egregious cost associated with repackaging, that is the real problem.  Many physicians, some who dispense, and others who do not, comment that the physicians aren’t the ones making money….it is the re-packagers that are making out ‘like bandits’.   While this may be true, it’s difficult to see how smart, educated physicians would continue this practice and the associated criticism if they aren’t making a nice profit.

 Potential Strategies to Mitigate Cost

The first step to mitigate claim cost is to be aware of physician dispensing and to move quickly to verify what the actual drug is.  Tower MSA Partners has full access to CMS mandated REDBOOK for drug pricing for all FDA approved NDC’s, as well as access to generic therapeutic equivalent drugs if they exist.   Ask the question.  Once you know what is being dispensed, and you understand the role the drug/compound plays in the overall treatment of the injury, the next question is whether intervention is appropriate to modify treatment and hopefully reduce cost.  We can assist there as well to make recommendations for nurse oversight, physician reviews. etc.

WCRI’s announcement of the report can be found at  http://www.wcrinet.org/whats_new.html.   For more information on physician dispensing and ‘staging’ claims to reduce claim cost , and to mitigate settlement and MSA issues, give us a call at 888-331-4941.

Christy Weir, RN, Joins Tower MSA Partners as Regional Vice President

July 18, 2012

Tower MSA Partners is pleased to introduce Christy Weir as the newest addition to its national sales team for Medicare Secondary Payer services.

A native of Atlanta, Georgia, Christy will be responsible for both southeast regional and national accounts for Medicare Set Aside and Medicare Secondary Payer  compliance services.   Christy has more than 15 years experience in providing cost containment services in the workers’ compensation and disability market.

Christy served the industry in various capacities, beginning her career as a registered nurse and case manager, and transitioning into sales more than 10 years ago.  Prior to joining Tower MSA Partners, Christy served the workers’ compensation market in local and regional roles involving both management and sales specific to Medicare Set Aside,  Pharmacy Benefit, and Case Management Services.

Christy received her nursing degree from Dekalb College School of Nursing and maintains  her license as a registered nurse in the state of Georgia.

Tower is pleased to have someone with Christy’s solid reputation for professionalism, sales and service as part of our organization, and we look forward to participating in her many successes.  Christy can be reached via email at christy.weir@towermsa.com, or via phone at 678-787-9412.

Lyrica Approved for Spinal Neuropathic Pain – What Are the MSA Implications if Pfizer Extends Patent?

July 3, 2012

On June 21, 2012, the Food and Drug Administration announced its approval of Lyrica for use in the management of neuropathic pain associated with chronic, debilitating spinal cord injuries. Lyrica, the brand name for pregabalin, is manufactured by Pfizer (NYSE: PFE) and is already widely used to treat fibromyalgia pain.

Prevalence of SCI Associated Neuropathic Pain
According to Pfizer, about 40 percent of the 270,000 Americans with spinal cord injuries suffer from chronic neuropathic pain that they describe as severe or excruciating. An estimated 12,000 new spinal cord injury patients are diagnosed in the U.S.each year.

Patients may experience neuropathic pain above, at or below the level of the spinal cord injury, and it may persist for up to 25 years. The pain stems from traumatic causes, such as motor vehicle accidents, violence, falls and sports injuries; where displaced bone fragments, disc material, or ligaments bruise or tear into spinal cord tissue.

Spinal neuropathic pain can also stem from non-traumatic causes, such as congenital and developmental abnormalities, genetics, infections and inflammation, removal of a benign spinal tumor and spinal cord ischemic stroke.

Treatment Options Previously Available
“Until now, no FDA approved treatment options were available in the U.S.for people with neuropathic pain associated with spinal cord injury, a condition which can be extremely disabling,” said Steven J. Romano, MD, senior vice president of Pfizer’s global primary care unit.

The FDA’s approval was based on studies of 357 patients – some with traumatic spinal cord injuries, and some with both traumatic and non-traumatic injuries. In addition to Lyrica, patients in the randomized, double-blind, placebo controlled Phase III trials were allowed to continue taking other pain medications, including NSAIDS, opioids and non-opioids.

Pain Reduction & Side Effects
According to Pfizer, patients taking Lyrica received up to a 50% reduction in pain than did patients receiving a placebo. Some experienced relief as early as week one and continuing through the duration of the 12 and 16 week trials.

Side effects experienced by patients included somnolence, dizziness, dry mouth, fatigue and peripheral edema.

Pfizer recently halted studies testing Lyrica’s effectiveness in treating neuropathic pain caused by HIV infection or diabetes after preliminary results showed that it was no more effective than a placebo.

Potential Impact on WCMSA and Settlement Cost
Though FDA approved only for neuropathic pain associated with fibromyaligia, Lyrica has consistently been listed in the Top 5 drugs used ‘off label’ in workers’ compensation (NCCI Research Brief, Workers’ Compensation Prescription Drug
Study: 2011 Update).  And, while CMS, in its May 2010 Memo, noted that off label drugs would be approved for inclusion in a WCMSA only as follows: For a Part D drug to be covered by Medicare, and thus included properly in a WCMSA, the drug should be prescribed for an outpatient use that is approved under the Federal Food, Drug, and Cosmetic Act [21 U.S.C.A. § 301 et seq.], or supported by one or more citations included or approved for inclusion in any of the compendia described in subsection (g)(1)(B)(I) of 42 U.S.C. Section 1396r-8. “,  in practice, CMS has included Lyrica as an approved drug more frequently than its has accepted its exclusion from the WCMSA based on the cited compendia.

As an added cost to those who prepare WCMSA’s, the recent FDA approval of Lyrica for spinal cord injuries allowed Pfizer to apply for an extension to its patent, and on July 19, 2012, patent rights preventing any generic substitutions of Lyrica® were extended by a district court until at least 2018.

A generic version of Lyrica  called ‘Lupin’ was approved on July 5th, 2012, which would have make it available for use in the WCMSA next summer.  Unfortunately, the district court’s decision to extend the patent rights will prevent the sale of this generic until December 2018.  As a result, MSA providers will be forced to price for the ‘branded’ single source version of Lyrica for an extended period of time, thus making the MSA cost projection for life expectancy much higher.

At Tower MSA Partners, our methdology, as it relates to Lyrica will continue to be as follows:

  1. Review the appropriateness of the medical and drug treatment for the specific injury with our panel of physicians.
  2. Identify triggers that warrant intervention and stop the WCMSA process.
  3. Work with the adjuster to establish an action plan to change treatment.
  4. Involve our team of physicians to review and contact the treating physician.

Combining evidentiary based medical guidelines with peer-to-peer contact, many treating physicians have been open to dialogue and willing to make changes.

As one of the most expensive drugs prescribed in workers’ compensation, we see the FDA approval of Lyricanal for spinal cord injuries to be of concern to those who seek to settle claims involving future medical for Medicare beneficiaries.  Lyrica is, and will continue to be, a significant cost driver for the MSA.  We do not, however, anticipate a change in our course of action when reviewing medical and pharmacy records prior to completing the MSA.  We will include Lyrica among our list of pre-MSA triggers, and will work proactively with our clients to get it removed by the treating physician prior to submission of the MSA for CMS approval.

Going forward, we will continue to monitor Lyrica and the prescribing patterns followed in workers’ compensation.  We will also monitor CMS’s inclusion of Lyrica as an approved drug for spinal cord injuries when reviewing a WCMSA.  For more information about Lyrica, or any  aspect of our pre-MSA review process, please contact us directly.