Georgia: Pharmaceutical Costs in Workers’ Compensation Claims

By Richard C. Kissiah

In July 2013, the Workers’ Compensation Research Institute (WCRI) of Cambridge, Massachusetts completed and issued a new study as to the effects of the Georgia State Board of Workers’ Compensation’s April 1, 2011 reform of its fee schedule as to the pricing of those medications repackaged and distributed by physicians. The WCRI study confirms that the reform has reduced the average price paid per pill for physician-dispensed medications, reduced the percentage of medications dispensed by physicians, and reduced the percentage of payments for physician-dispensed medications, even though the average price per pill paid still remains higher for physician-dispensed medication than for pharmacy-dispensed medication.

The Board has long had statutory authority over the fees of physicians and charges of hospitals. A question arose as to whether the Board also had authority as to charges for pharmaceuticals and charges for other items and services. The Board took the position that it already had just such authority. However, some individuals have nonetheless argued otherwise. The Georgia General Assembly, through Section 5 of HB424, amended O.C.G.A. § 34-9-205(a), effective July 1, 2007, to make it clear that the Board has authority not only over the fees and charges of physicians and hospitals, but also authority as to “charges for prescription drugs, and charges for other items and services under this chapter….” The Board revised its fee schedule to provide, among other things, that generic drugs are to be used when they are available, unless the physician prescribing the drugs hand writes either “brand medically necessary” or “brand necessary.” The Board also provided that “Prescription drugs will be reimbursed at the current average wholesale price (AWP) as published by Medi-Span, plus one dispensing fee per National Drug Code (NDC) per day of $6.27 for generic medications and $4.19 for brand name medications.” The Georgia Workers’ Compensation Medical Fee Schedule (4-1-2013) § IV, at p. 11.

Some Georgia physicians purchased bulk quantities of certain medications, presumably at a discount price, and then repackaged them into individual, unit-of-use, quantities that they would then dispense, presumably at a retail price, for their patients. This seems to have made the repackaging and sale of medications to workers’ compensation claimants a source of some real profit for some repackaging physicians. However, it also appeared that this was costing workers’ compensation insurers and self-insurers significantly more for pharmaceuticals distributed by physicians rather than by pharmacies.

Effective April 1, 2011, the State Board of Workers’ Compensation revised its fee schedule. While it allowed physicians to continue to repackage and distribute medications to workers’ compensation claimants, it provided that, where a physician repackages and distributes a medication to a workers’ compensation claimant, “All pharmaceutical bills submitted for repackaged products must include the NDC of the original manufacturer or distributor’s stock package used in the repackaging process. The reimbursement allowed shall be based on the current published manufacturer’s AWP (in the Medi-Span Directory) price of the product as of the date of dispensing.” The Georgia State Board of Workers’ Compensation’s Medical Fee Schedule (4-1-2011), § IV, at p. 10. The subsequent editions of the Board’s fee schedule continue to contain just such a provision.

WCRI completed and issued, in July 2013, a study as to what impact this reform as to medications repackaged and dispensed by physicians has had. That study entitled, “Impact of Reform on Physician Dispensing and Prescription Prices in Georgia,” is available for purchase through the following link: http://www.wcrinet.org/studies/public/books/impact_of_reform_phys_disp_ga_book.html. The WCRI study looked at the prices per pill of 13 generic medications commonly dispensed by physicians in Georgia workers’ compensation cases. Those generics, as well as the brand name equivalents for same (in parentheses) are as follows: Ibuprophen (Motrin), Tramadol HCL (Ultram), Hydrocodone-acetaminophen (Vicodin), Naproxen (Naprosyn), Cyclobenzaprine HCL (Flexeril), acetaminophen (Tylenol), Naproxen Sodium (Aleve), Ranitidine HCL (Zantac), Meloxicam (Mobic), Omeprazole (Prilosec), Cephalexin (Keflex), Etodolac (Lodine), and Carisoprodol (Soma). The WCRI study compared the average price per pill for each of these medications, when dispensed by a physician, pre-reform versus post-reform, using a pre-reform period covering claims with injuries from April 1, 2010 to September 30, 2010 and with prescriptions filled through March 31, 2011, and post-reform period covering claims with injuries from April 1, 2011 to September 30, 2011 and with prescriptions filled through March 31, 2012.

WCRI’s study found that, as to the aforementioned 13 medications commonly dispensed by physicians in Georgia workers’ compensation cases, the average price per pill paid for a physician-dispensed drug, from pre-reform to post-reform, dropped by anywhere from as little as 5% to as much as 75%, with most of the medications dropping, from pre-reform to post-reform, by 22 to 36%.

The WCRI study found that, even though the reform had resulted in quite a drop in the average price paid per physician-dispensed pill, “the average prices paid for physician-dispensed prescriptions remained higher than those for the same drugs dispensed at pharmacies. After the reform, the average prices paid to physicians for common drugs were mostly 20-40 percent higher than the prices paid to pharmacies for the same medications.” It then addressed the question of why prices for the same drug dispensed by a physician were not the same as, if not at least similar to, the prices for that drug dispensed by a pharmacy. WCRI noted, “We see some evidence that physician-dispensers prescribed certain strength drug products with a higher price more often in the post-reform period than in the pre-reform period.” The study suggested that this was partly a product of the FDA having become concerned about the potential adverse health risks of high dose acetaminophen so that some physicians were prescribing lower dose acetaminophen in higher quantities with a resultant increase in costs due to the increase in quantity. However, WCRI also noted a “possibility that the shift to lower strength drug product may have been partly motivated by some physicians’ desire to mitigate the reduction of income from dispensing prescriptions after the reform reduced the price it paid for physician-dispensed prescriptions.”

WCRI noted that another reason for which the average price paid per pill for medications dispensed by a physician was higher, even after the reform, than the average price per pill paid for the same medication dispensed by a pharmacy could be that, after the reform, physician dispensers were paid close to the AWP of the original drug product, “but the prices paid for pharmacy-dispensed prescriptions for the same drugs were often below the AWP of the same drug product.” Indeed, the study reflected that, even after the April 1, 2011 reform, “For most common drugs dispensed at pharmacies, the average prices paid per pill in Georgia were approximately 20-25% lower than the maximum reimbursement amount set at the AWP level.” WCRI suggested that this might be partly due to the fact that pharmacy benefit management companies often contract with pharmacies for discounted prices below AWP.

WCRI also noted that while 35% of all medications were dispensed by physicians prior to the April 1, 2011 reform, only 28% of all medications were dispensed by physicians after that reform. In terms of overall payments, 48% of medication payments were for physician-dispensed medications before the reform, but only 34% of medication payments were for physician-dispensed medications after the reform.

In sum, while Georgia has allowed physicians to continue to repackage and distribute medications in workers’ compensation cases, it has, effective April 1, 2011, made its fee schedule applicable to any such physician repackaging/distribution, and that reform has reduced the average price paid per pill for physician-dispensed medications, reduced the percentage of medications dispensed by physicians, and reduced the percentage of payments for physician-dispensed medications, even though the average price paid per pill for the 13 drugs commonly dispensed by physicians in workers’ compensation cases remains higher for a physician-dispensed medication than for a pharmacy-dispensed medication, with some of the difference between the two types of dispensation being the result of pharmacy benefit management companies having negotiated below average charges for medications with the pharmacies with whom they contract.

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