Workers' Compensation

Louisiana: Wholesale Pharmacy Providing Pharmaceuticals to Doctor for Dispensing on Consignment Basis Has No Right of Action Against Employer/Insurer

By Jeffrey C. Napolitano, Juge Napolitano Guilbeau Ruli & Frieman, a plc, Metairie LA

Wholesale pharmacies who contract with physicians to provide pharmaceuticals to them on a consignment basis for dispensing to their workers compensation patients, cannot seek payment for the pharmaceuticals directly from the employer/insurer under Rebel Distributors Corp., Inc. d/b/a Physician Partner and Pharmacy Partner v. LUBA Workers’ Comp., released by the Louisiana 3rd Circuit court of appeal on March 6, 2013.  The court’s opinion can be downloaded from the court’s website here

In a case successfully defended by Jeffrey C. Napolitano, the Louisiana 3rd Circuit court of appeal ruled in favor of employer/insurer finding that a wholesale pharmacy distributor, who contracts with physicians to provide pharmaceuticals to the physicians on a consignment basis for dispensing to their workers compensation patients, has no right of action to bring suit against the employer/insurer for payment for the pharmaceuticals.  The court held that only the employee or healthcare provider has a right to bring suit for payment for providing medical services to an injured employee under the workers compensation act, and this right is not assignable under La.R.S. 23:1205(A).

Physician Partner is a pharmaceutical repackager and wholesale pharmacy who supplies pre-packaged pharmaceuticals to physicians for in-office physician dispensing to workers compensation patients.  Physician Partner, a division of Rebel Distributors, obtains pharmaceuticals in bulk from manufacturers, repackages the pharmaceuticals in “unit of use” quantities, and reprices the original Average Wholesale Price (AWP), often with a significant markup.  The pharmaceuticals are supplied to the physician on a cost-free consignment basis.  Once the drugs are dispensed to the patient, Physician Partner bills the employer/insurer directly.  The proceeds are then split between Physician Partner and the doctor on a contractually agreed upon basis.

Under this type of arrangement, since the drugs are provided to the doctor on a cost-free basis, Physician Partner was free to name their own AWP as high as they desired, then demand reimbursement at the Louisiana fee schedule cap of AWP plus 40% of AWP on generic drugs.  Omeprazole, the generic for Prilosec, could be obtained over the counter for the price of $27.84 per bottle.  By setting their own AWP, Physician Partner was demanding a price of $702.97 per bottle under the fee schedule for the same drug dispensed by the doctor.

The 3rd Circuit noted that LA.R.S. 1205(A) prohibits assignments of claims or payments under the workers compensation act and held that the contract between Dr. Heard and Physician Partner was an illegal assignment of rights between two independent contractors.  As such, Physician Partner is not a healthcare provider, nor an agent of any healthcare provider under the contract, and therefore has no right of action to proceed in the OWC against the employer/insurer.

Since the case was dismissed on procedural grounds, the court did not address any of the substantive issues, such as choice of pharmacy, whether repricing of repackaged drugs violates the provisions of the fee schedule, or whether the doctor was in violation of the anti-kickback provisions of LA.R.S. 37:1745.

© Copyright 2013 Juge, Napolitano, Guilbeau, Ruli & Frieman. All rights reserved. Reprinted with permission.