The Price Of Pain Management - The True Cost Of Compound Medications, Part 2

Compound medications are here to stay. However, just like any other "fad" in medical treatment, the more we become aware of the risks of the product and the defenses against use and reimbursement, the easier the claims process will be.

This is the second in a two-part series on pain management and the true cost of compound medications. The first part in the series can be found here.

Issues With Quantity And Distribution
It is difficult to determine the quantity needed to constitute a day's worth of medication, as an amount needed per individual is incredibly subjective. Therefore, current medication distribution could be for amounts much larger than are needed, resulting in waste, as well as an increased price in medications based on quantity. Shipping and handling creates yet another problem. Included with the reimbursement price of a medication is a dispensing fee, which is a set rate depending on if the medication is name-brand or generic. There is no fee schedule or even recommended reimbursement for shipping and handling. Shipping and handling is generally only seen when medications are mass produced from pharmacies out of the area (mail order) and then shipped to injured workers based on prescriptions.

How are these prescriptions making their way to pharmacies not accessible by the injured worker? The likely source is from the prescribing doctor, which raises ethical questions. Does the doctor have a fee agreement or financial interest in the pharmacy? Does the pharmacy conform to California state law and have a current license to dispense medications? Are the employees of the pharmacy properly trained and approved to package and ship medications? Answers to these questions are difficult to answer, and pharmacies do not want to answer them.

Financial Issues
As previously stated, one need only to trace most medical "fads" back to one single item: money. Who can make money from the medical treatment, and more importantly, who is making money from the medical treatment? California Labor Code § 139.3 precludes physicians from referring patients for certain services if the physician or his immediate family has a financial interest with the entity that receives the referral. These "self referrals" are nothing new to the industry. For example, the introduction of surgical centers for outpatient procedures into the Workers' Compensation arena brought with them a plethora of doctors who grouped together or invested in various surgical centers. Within a short amount of time, surgery centers were found in all major metropolitan areas throughout the entire State. Fortunately, assemblyman Solorio's bill goes to great lengths to address this problem, adding prescription and pharmacy services to the growing list of items not allowed to be referred out when there is a financial interest.

What are some of the recommendations we can demand be implemented to reign in some of the problems discussed above? There is no single fix, other than the elimination of compound medications altogether. As this does not appear to be possible, some recommendations include:

  • Establishing ceilings on reimbursement for medications including percentages of reimbursement from MediCal payment schedules or documented cost of providers who are filling medications. It appears AB 378 accomplishes some of this recommendation.
  • Setting maximum reimbursements allowed based on bulk ingredient purchases, a set percentage for mark-up and a set maximum dispensing fee.
  • Requiring use of NDC codes if available. If not, billing must include additional information including a description and/or invoice showing the price and related quantity of the ingredient. Otherwise a $0 reimbursement will issue. AB 378 will accomplish some of this recommendation.
  • Encouraging carriers and Third Party Administrators to participate in a pharmacy benefit management (PBM) company. These companies handle billing, create pharmacy networks and even help control costs. pharmacy benefit management companies can often establish protocols for timely review within Utilization Review parameters. Case law allows for pharmacy benefit management companies.
  • Reviewing the current requirement for average wholesale prices as discussed above and requiring payment based on the lowest available price from all manufacturers.
  • Preventing physicians from referring services pertaining to compound medications to locations where the physician or immediate family member has a financial interest. AB 378 will result in adding compound medications to the list of goods under Labor Code § 139.3.
  • Preventing liens from being filed for more than the statutory amount allowable under the fee schedule or set price amounts. Additionally, requiring lien claimants to provide all documentation needed to support their position at the time of the initial filing.
  • Amending Labor Code § 4906.3 to require that liens cannot be filed until a medical bill is actually in dispute.
  • Preventing the use of bulk ingredients that are not components of FDA approved drugs.
  • Removing compound medications from use until they are subject to double blind testing and FDA approval.

The options for defense of compound medications are relatively simple to use and to implement. Most require few steps beyond normal practices in the claims process and all can be quite effective. In implementing a strategy for defense, it is important to focus on your particular case, and choose the argument options best suited for your set of facts.

  1. Use the Labor Code
    1. Labor Code § 4604.5(e) requires "other evidence-based medical treatment guidelines [be] recognized by the national medical community and that are scientifically based." When paired with Labor Code § 4600, treatment that is not supported by "a preponderance of evidence establishing that a variance from the guidelines is reasonably required", should be argued to not be substantial medical evidence.
    2. Labor Code § 4600.1 requires the use of generic medications unless the physician demonstrates they are not available or notes why the name brand medication is necessary. Make the doctor explain why compound medications are necessary.
  2. Verify if the doctor comments on the effectiveness of medications to support ongoing use as is required. Most of the time, this does not occur.
  3. When reviewing billing, ensure your bill review company/department checks to ensure all NDC codes are proper. Those that are not receive a brief explanation and $0 reimbursement.
  4. Request copies of all prescriptions. Due to submission to the pharmacy directly, we often do not know the exact medication prescribed, the dosage and the number of refills, if any. We frequently see multiple pharmacies ship the same medications on a schedule — are they correct in doing so?
  5. Ask for receipts or invoices on purchases for bulk medications and inactive ingredients — what are they paying for the medications and what is the mark-up they are asking for? This is discoverable information and can be used to argue price.
  6. Insist all prescriptions are dispensed through a pharmacy benefit management (PBM) program and encourage clients to participate in one. See the Brambila decision.
  7. Inquire about the prescribing doctor's financial interest or relationship with dispensing pharmacies. Most doctors use the same pharmacy, regardless of location of the applicant.
  8. Never pre-approve medications. Always insist they be submitted to Utilization Review.
  9. Request licensing information of the facility performing the services. Are they up to date? Are they complying with State regulations?
  10. Ask for qualifications/training/certificates of the people creating the medications.

The more information you demand, the more likely pharmacies will be willing to negotiate, and the more information you will have for trial. They do not want you to know their bulk pricing and mark ups. Many may have staff that are not properly trained and some may have licensing issues. In order to not release this information, they will often drop demands for lien settlement by significant amounts and become much more reasonable in settlement discussions.

Compound medications are here to stay. However, just like any other "fad" in medical treatment, the more we become aware of the risks of the product and the defenses against use and reimbursement, the easier the claims process will be.

*Special thanks to Juan Pedroza and Steve Napolitano

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