November 12, 2011
This is the first of a two-part series on pain management and the true cost of compound medications. The second part in the series can be found here.
In the world of Workers' Compensation, medical treatment is provided with traditional methods as well as current medicine trends or "fads." "Reasonable and Necessary" medical treatment afforded under the Labor Code can steer off course when popular/trendy medical treatment and procedures replace time-tested and proven forms of medical care. One such unproven trend are compound medications. Compound medications do have their advantages and can be considered reasonable medical care. However, they have evolved from a useful medication alternative into multiple problems that require expensive and needless litigation. Why? The answer is simple: money.
It is the opinion of the author that compound medications made their entrance on a large scale due to the demise of another trendy medication phenomenon, repackaged generic medications. In 2007, California instituted a change to their fee schedule which largely eliminated differential pricing on repackaged drugs. As a result, repackaged drug prices dropped sharply, resulting in a rapid decline in their use. Shortly thereafter, compound medications began to appear as an alternative to other medications use. Compounds are not a new modality for providing pain management and other needs though their use has exploded in the past few years.
The Overall Cost
Pharmacy and medication treatment already constitute a large percentage of all costs in Workers' Compensation medical care. With the addition of compound medications, the problem has expanded to epic proportions. A recent study by Rand Corp. at the request of the California Commission on Health and Safety and Workers' Compensation (CHSWC) found that payments for these medications accounted for 12% of all drug costs in the first quarter in 2009 alone. Payments from 2006-2009 totaled $29 million over three years. State Compensation Insurance Fund (SCIF) payments in 2009 totaled $28 million.1 Further California Commission on Health and Safety and Workers' Compensation analysis also found that approximately 25% of all treatment liens at all Workers' Compensation Appeals Board offices involve pharmacies and/or dispensed drugs.2 The numbers continue to increase over time. The amount of liens clogging the Workers' Compensation Appeals Board was a large enough problem to force Judge Frank of the Los Angeles Workers' Compensation Appeals Board to hold conferences in late 2010 to address the possible mass consolidation of liens involving these medications, in an attempt to control lien filings and litigation.
The California State Assembly has also become involved in an effort to reign in the rapidly expanding use of these medications and the problems associated with their billing. Assemblyman Jose Solorio (D- Santa Ana) recently introduced AB 378, which has been signed by Governor Brown. AB 378 adds pharmacy goods and compound medications to the list of medical services for which it is unlawful for a physician to refer a patient for treatment if they or immediate family members have a vested financial interest in the facility that receives a referral. The bill also establishes maximum reimbursement amounts for compound medications and would require billing be done at the ingredient level. Further, the bill places limits on reimbursement for physician-dispensed pharmacy goods.
The overall cost of these medications is not limited to the cost of the actual medication. Health risks, issues with billing and distribution and physician compensation make compound medications an expensive and often unreasonable modality of medical care.