Tag Archives: average wholesale price

Physician Dispensing Skirts Controls

A new report from the Workers Compensation Research Institute (WCRI) found evidence of frequent physician dispensing of new drug strengths and a new formulation at much higher prices. This phenomenon was observed in several states that recently instituted reforms aimed at reducing the prices for physician-dispensed prescriptions. Skirting the goals of those reforms, dispensing increased for new formulations of drugs that carried higher prices. That trend led to substantial increases in average prices for some common physician-dispensed drugs.

“When prices are reduced by regulation, the regulated parties―in this case physician-dispensers―sometimes find new ways to retain the higher revenues they had prior to the reforms,” said Dr. John Ruser, president and CEO of WCRI. “The results raise questions about the effectiveness and sustainability of the price-focused reforms. The study also provides lessons for those states where physician dispensing is permitted.”

See Also: Novel Controls on Physician Dispensing

This report, Physician Dispensing of Higher-Priced New Drug Strengths and Formulation, is part of a series of WCRI studies that examine the effects of regulatory or legislative changes to the rules governing reimbursement for physician-dispensed prescriptions. In the past decade, many states in the U.S. have enacted reforms to cap prices paid to physicians by tying the maximum reimbursement amount to the average wholesale price (AWP) set by the original manufacturer of the drug. However, new strengths and formulations of drugs are labeled as being made by generic manufacturers, not merely as being repackaged, a technical distinction that lets the new strengths and formulations avoid the new reimbursement rules — the generic “manufacturer” gets to set its own, much higher AWP.

The study reported several drugs that exhibited this phenomenon and highlighted several states where physician dispensing of these new drug products was prevalent. Take cyclobenzaprine, a muscle-relaxant. The 7.5-milligram new strength was not seen in the market until 2012. For many years, the most common strengths were 5 and 10 milligrams. The manufacturer of this new strength assigned a new AWP, which was much higher than the AWPs for the 5- and 10-milligram products. Below are some examples from the study of the frequent physician dispensing of higher-priced new strengths.

  • California: The average prices paid to physicians for cyclobenzaprine of 5 and 10 milligrams ranged from $0.38 to $0.39 per pill in the first quarter of 2014. The 7.5-milligram product, introduced in 2012 and almost always dispensed by physicians, cost $3.01 per pill in the same quarter. The percentage of physician-dispensed cyclobenzaprine prescriptions that were for the 7.5-milligram strength increased from 0% prior to 2012 to 55% in the first quarter of 2014.
  • Florida: The average prices paid for physician-dispensed cyclobenzaprine of 5 and 10 milligrams were $1.75 and $1.29 per pill, respectively, in the first quarter of 2014. The 7.5-milligram new strength was seen prior to Florida’s 2013 reform, but the frequency of dispensing increased substantially post-reform—from 16% in the pre-reform second quarter of 2013 to 49% in the first quarter of 2014. When physicians dispensed the 7.5-milligram new-strength product, they were paid an average of $4.11 per pill.
  • Illinois: The average prices paid to physicians for cyclobenzaprine of 5 and 10 milligrams were $1.55 and $1.25 per pill, respectively, in the first quarter of 2014. Prior to Illinois’ 2012 reforms, the 7.5-milligram new strength was rarely seen in the market, but, by the first quarter of 2014, 22% of all physician-dispensed cyclobenzaprine prescriptions were for the new strength. When physicians dispensed the new strength, they were paid on average $3.86 per pill.
  • Tennessee: Ten-milligram cyclobenzaprine was the most-commonly dispensed drug strength by physicians in the state, which cost $1.08 per pill on average in the first quarter of 2014. The 7.5-milligram product was not seen in the initial post-reform quarters until the fourth quarter of 2013. By the first quarter of 2014, 19% of physician-dispensed cyclobenzaprine prescriptions were for the 7.5-milligram new strength. When physicians dispensed the new strength, it cost $3.97 per pill on average.

The data used for this report came from payers that represented 31–70% of all medical claims across 22 states studied and covered detailed prescriptions based on calendar quarter from the first quarter of 2012 though the first quarter of 2014. The 22 states in the study are Arizona, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Missouri, New Jersey, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Virginia and Wisconsin.

To purchase this study, visit here.

Stop Overpaying for Pharmaceuticals

Legislators in all jurisdictions have attempted to rein in the cost of pharmaceuticals in workers’ compensation in an effort to reduce insured employers’ workers’ compensation premiums.

California, in particular, passed legislation between 2002 and 2007 to reduce pharmaceutical costs, yet expected reductions have not been forthcoming. Attention needs to focus on whether claims administrators have taken full advantage of this legislation and whether they could be doing more to help reduce the cost of pharmaceuticals.

A recent Workers Compensation Research Institute (WCRI) study titled “Are Physician Dispensing Reforms Sustainable?” found that the average price paid in California for 5mg and 10mg Cyclobenzaprine, a muscle relaxant, ranged from $0.35 to $0.70 per tablet (from the first quarter of 2010 through the first quarter of 2013). An independent study of Medi-Cal pharmaceutical prices used for California Workers’ Compensation found, however, that since 2009, 10mg Cyclobenzaprine has been priced at $0.10 per tablet and as low as $0.05, while 5mg Cyclobenzaprine has been priced at $0.16 per tablet and has also been as low as $0.05. The comparison suggests that claims administrators have overpaid.

The 2006 California Commission on Health and Safety and Workers’ Compensation (CHSWC) study titled “Impact of Physician-Dispensing of Repackaged Drugs on California Workers’ Compensation, Employers Cost, and Workers’ Access to Quality Care” also showed significant cost differences. For example, an insured employer’s estimated total cost for each tablet dispensed at the correct Medi-Cal price of $0.10 was $0.29 per tablet. For each tablet dispensed at a price of $0.35, estimated total costs increased by between $0.70 and $0.99. When dispensed at $0.70 per tablet, estimated total costs increased by between $1.69 and $1.98 per tablet. This significant increase is directly caused by claims administrators paying far more than the published Medi-Cal price.

What can claims administrators do to ensure they do not overpay for medications?

First: Monitor medications dispensed. Second: Ensure that no more than the legislated maximum price is paid.

The California Department of Industrial Relations (DIR) website provides a medication pricing inquiry screen requiring entry of a National Drug Code (NDC) and other details taking approximately 10 seconds to obtain the price of a medication on the date it was dispensed. In addition, current pharmaceutical pricing data is available that can be loaded into a claims administrator’s computer system or program, such as a spreadsheet. To complement the DIR’s offerings, the U.S. Food and Drug Administration (FDA) website also provides NDC inquiry and download facilities, plus a downloadable file of suppliers of medications showing their labeler code(s) along with their company name. The labeler code is the first of three parts associated with the NDC identifying the supplier of the medication. For claims administrators wanting to know more about medications, the FDA offers the “Orange Book” for download, listing all FDA-approved medications along with therapeutic equivalence evaluations. With all this free information, California workers’ compensation claims administrators have no excuse for overpaying.

For jurisdictions that utilize the average wholesale price (AWP) to set their maximum price for a medication, claims administrators will need to license pricing information from sources such as Medi-Span (Wolters Kluwer Health) or Red Book (Truven Health Analytics). Both offer extensive pharmaceutical information for download into a claims administrator’s computer system or, alternatively, use of the vendor’s inquiry facilities.

The passing of legislation in California that set the same prices for medications regardless of dispenser (i.e. pharmacy, mail order/PBM or physician) has provided opportunities for medications to be dispensed by a physician without paying a higher price and for more accurate and timely details relating to medications being available to claims administrators.

The invoice a physician submits (either paper or electronic), includes services rendered at the person’s medical appointment with a report outlining their current medical conditions and other pertinent information, including the date of their next medical appointment. Receiving billing details on the same invoice for medications dispensed, which would include the NDCs, quantities dispensed and prices charged, provides the claims administrator with an excellent opportunity to review the appropriateness of the medication against the diagnosis and treatment plan as well as the prices charged, all in one step. In addition, there is the opportunity to review any physician treatments that differ from the norm (i.e. guidelines), which may be necessary so as not to interfere with any non-work-related treatments under the control of the person’s own physicians.

In cases of pain management and where step-therapy is used, the claims administrator can ensure that physician-dispensed medication quantities are limited to the next medical appointment and assist in determining when the person may be able to either return to work or stay at work during their recovery. In many cases, acute pain is treated with acetaminophen (aka paracetamol) and nonsteroidal anti-inflammatories (NSAIDs), allowing a person to either stay at work or return to work earlier. At times, however, narcotic analgesics may be required to control pain that blocks pain receptors to the brain, slowing the person’s cognitive function and reaction times, possibly restricting their ability to either stay at work or return to work early.

Claims administrators also have the opportunity to monitor a physician’s pharmacy formulary to ensure they are dispensing medications from suppliers with the lowest or the average lowest price for a medication. Claims administrators should never have to pay the “no substitution” price for a physician-dispensed medication. For some medications, the Medi-Cal “no substitution” price can be much higher than the regular price.

Considering that claims administrators currently perform some form of medical bill review, to include pharmacy price and utilization verification would add minimal additional effort to the overall medical bill payment process, regardless of whether the physician’s invoice is received on paper or electronically.

Claims administrators with computer systems that monitor medications through the NDC have the opportunity through physician dispensing to invoke timely automated processes based on the NDCs shown on the physician’s invoice. For example, if claims administrators use an adaptation of the biopsychosocial and shared-decision making frameworks (i.e. collaboration) to address a stay at work (SAW) or early return to work (ERTW), a more empathetic approach to claims handling is required. This SAW/ERTW approach can be enhanced through invoking processes based on the physician’s submitted NDCs, which may include: a pre-defined questionnaire associated with distress and risk, focusing on somatic and emotional symptoms: a pre-existing anti-depressant medications questionnaire that establishes whether the person is already taking anti-depressants’ as well as a cultural sensitivity questionnaire relating to a person’s religious or spiritual beliefs and their cultural and language preferences. The results from these questionnaires can directly influence the medical treatment pre-authorized by the claims administrator as well as assist in determining when the person is likely to return to “normality.” All this information directly influences the cost of the claim, which in turn determines the future premiums paid by the insured employer. For claims administrators who do not have capabilities such as these in their computer systems, there are systems available.

Having physician-dispensed medications billed in a timely way on the same invoice as other medical services improves both transparency and accountability. This recent WCRI study has highlighted that insured employers in California may have paid higher premiums for policy periods from 2011 through 2014, caused by claims administrators overpaying for the 5mg and 10mg Cyclobenzaprine medications, which was only brought to the attention of the workers’ compensation community in 2015.

Considering that expected savings from the enacted California legislation relating to pharmaceuticals have not been forthcoming, it is only a matter of time before insured employers conduct their own studies investigating how much has been overpaid for dispensed medications and how much this overpayment may have increased their premiums since 2007. Depending on the findings from this type of study, a possible outcome could result in California workers’ compensation insurers being forced to restate their claims costs associated with pharmaceuticals and all pharmaceutical overpayments by their claims administrators to be treated as an expense outside of their workers’ compensation insurance portfolio.