CWCI Study Measures Outcomes for Claims with Physician-Dispensed Repackaged Drugs

CWCI Study Measures Outcomes for Claims with Physician-Dispensed Repackaged Drugs

A new California Workers’ Compensation Institute study shows that on average, California work injury claims from 2002 through 2011 that involved physician-dispensed repackaged drugs had 17 percent higher medical benefit costs, 13 percent higher indemnity costs and 9 percent more lost-time days than similar claims without physician-dispensed repackaged drugs.

Use of physician-dispensed drugs to treat injured workers has become more commonplace and controversial over the last 10 years. In California workers’ compensation, the use of these drugs exploded between 2002 and 2006, as a loophole in state regulations allowed doctors who dispensed repackaged drugs from their offices to obtain much higher payments than pharmacies for the same medications. Prior studies found that workers’ compensation reimbursements for repackaged drugs often exceeded the amounts paid for equivalent pharmacy-based prescriptions by 500 percent or more, and that by 2006, physician-dispensed repackaged drugs had grown to almost 55 percent of all outpatient prescriptions and nearly 60 percent of total prescription drug payments in the system. Those associated with physician dispensing have historically claimed that physician dispensing improves injured worker access to prescription services and better patient compliance with their drug regimen, leading to improved medical and disability outcomes. Those assertions, however, are often challenged by suspicions that physician-dispensing has been largely driven by financial motives.

In February 2007, the state Division of Workers’ Compensation responded to the growth of physician-dispensed repackaged drugs by revising the pharmacy fee schedule which, as of March of that year, largely eliminated differential pricing for these medications. The effect was immediate, as both the volume and the amounts paid for these drugs declined by more than 90 percent by 2011. Access studies also showed that on average, injured workers in California had a choice of up to 5 pharmacies within 2.2 miles of the dispensing physician’s office, further refuting the assertions that injured workers would be unable to obtain their medications should physician dispensing of repackaged drugs be curtailed.

The new CWCI study examines the connections between physician-dispensed repackaged drugs and overall claim outcomes, and is based on data from 1.3 million open and closed California workers’ compensation claims with dates of injury from January 2002 through December 2011. All together, these claims involved nearly 11 million prescriptions, of which 28 percent were identified as physician-dispensed repackaged drugs. To determine changes in injured worker outcomes after the repackaged drug loophole was closed, the claim sample was divided into 2 time periods, before and after the March 2007 reform period.

Overall, the authors found that across the 10-year span of the study, 14 percent of the claim sample (28 percent of the pre-reform claims and 6 percent of the post-reform claims) contained one or more physician-dispensed repackaged drugs. Paid medical benefits on the 2002-2011 claims with physician-dispensed repackaged drugs averaged $6,017 ($5,524 pre-reform, $7,297 post-reform), or 17 percent more than the $5,145 average for claims without these types of prescriptions ($4,747 pre-reform, $5,316 post-reform).

In addition, the study found that indemnity payments for the claims with physician-dispensed repackaged drugs averaged $4,229 prior to the reform and $5,039 after March 2007, for a 10-year average of $4,455 -- 13.1 percent more than the $3,937 10-year average for claims without these prescriptions ($3,956 pre-reform, $3,930 post-reform). The claims with physician-dispensed repackaged drugs also involved longer periods of disability, averaging 37.6 paid TD days pre-reform, and 50.3 paid TD days post-reform, for a 10-year average of 44.1 paid TD days -- 8.9 percent more than the average of 40.5 days (36.3 days pre-reform, 46.2 post-reform) for claims without physician-dispensed repackaged drugs. Furthermore, the researchers calculated that the presence of each repackaged drug prescription added $482 to the average amount paid in medical benefits per claim.

Additional analyses, graphics and data on physician-dispensed repackaged drug study are included in a CWCI Research Brief, “Differences in Outcomes for Injured Workers Receiving Physician-Dispensed Repackaged Drugs in the California Workers’ Compensation System,” which is posted in the Research section of the Institute’s website at