Tag Archives: NDC

Novel Controls on Physician Dispensing

As you know, I’m not a fan of physician dispensing. In limited cases, there can be benefits from patient compliance and convenience and from immediate treatment. However, my opinion is that in most cases physician dispensing creates a motivation to continue prescribing (because revenue to the physician is at stake) and causes patient safety issues (by bypassing the people who really understand drugs — pharmacists and pharmacies — and possibly not taking into account drug interactions).

On top of that, physician dispensing can increase lost time by an injured worker, as documented in a study of Illinois. When evaluating the differences between physician-dispensed and non-physician-dispensed medications, the study found:

  • For physician-dispensed, non-narcotic drugs — medical costs ▲ 39%, indemnity costs ▲ 27%, lost-time days34%, average total claim ▲ 31%, # of prescriptions = 2.99
  • For physician-dispensed narcotic drugs — medical costs ▲ 78%, indemnity costs ▲ 57%, lost-time days ▲ 85%, average total claim ▲ 64%, # of prescriptions = 3.20

Several states have tried to combat inappropriate physician-dispensing over the past few years, using fee schedule and rules and even felonies as countermeasures. Some efforts have been successful, while others have just created a continuing cat-and-mouse game for repackagers and physicians vs. payers.

Well, effective Jan. 1, 2016, Nevada instituted its own type of reform, specific to workers’ comp. The bill does not appear to be ambiguous or up for interpretation. The bill (SB 231) was signed by the governor on May 27, 2015, but the intended (and unintended) ripple effects started last Friday. Read the entire act here. To highlight:

  • Section 1.1.a – A “provider of healthcare” can only provide an initial 15-day supply of Schedule II or III controlled substances to an injured worker. Note that this excludes pharmacists and hospitals, both reasonable carve-outs. Any subsequent such controlled substances must be dispensed by a pharmacy. Excellent.
  • Section 1.1.b – The “provider of healthcare” dispenser must include the original manufacturer’s national drug code (NDC) on bills and reports. Good. This doesn’t necessarily fix the issue of repackagers becoming “manufacturers” of unique (previously unnecessary) dosages and inflating prices, but …
  • Section 1.1.c – A repackaged drug must not be used. Booyah.
  • Section 1.1.d – For outpatient care, a non-prescription drug will not be reimbursable. Excellent.

While not all dangerous or clinically inappropriate drugs are Schedule II or III, these new rules should certainly make a dent in direct dispensing of those that are. This bill does not outlaw physician dispensing, but it does remove revenue motivation so a “provider of healthcare” will focus on the most clinically appropriate care (which may not be a drug). Working as a team, the “provider of healthcare” and the pharmacist should determine what, if any, drugs are clinically appropriate for the injured worker/patient.

It will be interesting to see how the repackaging industry responds. For an example of the state of the industry in Nevada, check out this website. (Nine uses of the word “revenue” on the repackager’s home page. Hmmmm.)

If you operate in Nevada, keep your eyes and ears open. And if you see reactions, please let us all know!

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.

Physician Dispensing: I’ve Changed My Mind

In the past, I’ve argued that there are legitimate reasons a doctor might dispense medications to a patient and that legislative and regulatory efforts to curb abuses of physician dispensing should be focused on the elimination of the financial incentive to do so while preserving the practice for the limited circumstances in which it might be necessary.

I’ve changed my mind.

The WCRI report published recently makes it crystal clear that the creativity of physician dispensers will always lead to maximization of revenue (and clearly inappropriate utilization of medications) unless the practice itself is eliminated.

The report shows that, essentially, drug re-packagers in California created novel dosages of certain medications to evade the constraints of the physician dispensing regulations. This allowed them to return to the typical physician-dispensing practice of creating new NDC codes and charging exorbitant amounts of money for drugs that would be have been substantially cheaper had they been secured through a retail pharmacy. Worse, utilization of these medications skyrocketed as a result of the revenue incentive for physicians (my conclusion, not WCRI’s).

Physician dispensing doesn’t make sense. Not in any circumstances. I could see a potential allowance for a one-time, short-term fill, but the routine dispensing of medications by physicians to patients should be banned. Immediately.

(Disclosure: PRIUM, and our parent company, Ameritox, provide financial support to WCRI).

The Paradox on Drugs in Workers’ Comp

Pharmaceuticals remain a large component of both total claims and medical costs in treating workers’ compensation injuries and illnesses. On the plus side, pharmaceuticals lower medical costs by decreasing demand on other health resources, improve health outcomes, including treatment safety, and provide earlier opportunities to return to work. On the negative side, prices can be very high.

States have been trying to address that negative through numerous efforts for many years, yet costs keep climbing. A study finds that a solution exists, if claims administrators become aware at the most granular level about the sources of medications and the prices that suppliers charge.

Background

Pharmaceutical pricing in the U.S. is unregulated. Pharmaceuticals are manufactured through two sources, (1) the originator (i.e. the inventor) of the medication and (2) the generic manufacturer. The originator markets the medication through a brand or trademark name and has sole marketing rights for a period. This period varies from country to country, but the norm is from five to 10 years. On expiration, generic pharmaceutical manufacturers are allowed to produce the medication and introduce price competition into the market. Pharmaceutical Research and Manufacturers of America (PhRMA) reports that generic medications account for 80% of dispensed medications in the U.S.

In an effort to control pharmaceutical pricing in California workers’ compensation, a number of legislative changes were introduced.

2002 – Claims administrators could use pharmacy benefit managers (PBMs) and pharmacy benefit networks (PBNs) to establish contract prices below the maximum price established by the legislature and to scrutinize prescribed medications at the time of dispensing. A reduction in pharmaceutical costs was expected, yet a report prepared by the California Workers’ Compensation Institute (CWCI) in October 2014, titled “Report to the Industry: Are Formularies a Viable Solution for Controlling Prescription Drug Utilization and Cost in California Workers’ Compensation?” showed the average pharmacy cost for the first year of treatment for an indemnity claim increased from $390 in 2002 to $430 in 2003 (an increase of more than 10%).

2004 – The pharmacy formulary (i.e. list of medications) established by California’s Medicaid welfare program, called “Medi-Cal,” was introduced into workers’ compensation. The formulary and price schedule are based on the state’s negotiated price with suppliers. By contrast, most other workers’ compensation jurisdictions use schedules based on the supplier’s average wholesale price (AWP), with a plus or minus percentage adjustment to establish the maximum price (e.g., AWP + 10% or AWP – 5%). Both the Medi-Cal price and the AWP are established before any off-invoice discounts, rebates or other incentives are applied by the pharmaceutical supplier. Price differences between Medi-Cal and the AWP can vary significantly. For example, paying the lowest Medi-Cal price of 4 cents per unit for the generic medication Meloxicam 7.5mg tablet, instead of paying the AWP, provides a saving of as much as 98%. Once again, expectations for a significant reduction in pharmaceutical costs were anticipated, but, according to the CWCI, the cost only dropped from $321 in 2004 to $282 in 2005 (a reduction of 12%), before increasing to $352 in 2006 (an increase of almost 25%).

2005 – In an effort to control total medical costs, claims administrators in California were allowed to establish their own medical provider networks (MPN). The intent of this legislation was to curtail the adversarial relationship between the medical profession and claims administrators and also provide an opportunity for establishing contract rates with physicians, below the mandated maximum prices, for both services rendered and medications dispensed. This time, the expectation was to see a reduction in costs for both medical treatments and medications dispensed by a physician. Instead, the CWCI showed an increase from $282 in 2005 to $352 in 2006 (almost 25%) and then to $412 in 2007 (a further increase of 17%).

2007 – Legislation was enacted to require that the maximum price paid for a supplier’s medication that was not listed in the Medi-Cal formulary be equivalent to similar medications listed in the Medi-Cal formulary; the prior practice was to use the supplier’s AWP to calculate the price.

The Medi-Cal formulary includes a number of suppliers providing the same medication. PBMs, PBNs and physicians dispensing medications also have formularies that may have different suppliers to Medi-Cal, especially where a large number of suppliers are involved. For example, Gabapentin is available from more than 55 suppliers, which may include the originator, the generic manufacturers and companies that repackage others’ medications in various package sizes. Hydrocodone-Acetaminophen is available from at least 45 suppliers in different strengths and package sizes.

Again, the legislation was expected to lead to a significant decrease in costs, because a number of physicians were dispensing medications from suppliers that were not listed in the Medi-Cal formulary. The cost, however, increased by almost 7%, from $412 in 2007 to $440 in 2008. This percentage increase is baffling. The National Council on Compensation Insurance (NCCI), in its September 2013 report titled “Workers’ Compensation Drug Study: 2013 Update,” ranked Meloxicam as the highest physician-dispensed medication by dollars paid. By applying the Medi-Cal price, instead of the AWP, cost savings should have been as high as 98%. The savings for Tramadol HCL, the second highest ranked physician dispensed medication by dollars paid, were 89% based on the Medi-Cal price of 9 cents per unit.

So, legislation enacted in California from 2002 through 2007 provided all the means to control and curtail pharmaceutical costs. Yet, according to the CWCI, the average first year pharmaceutical cost per indemnity claim reached $953 in 2012 from $390 in 2002 (an increase of 144%).

The Study — Huge Range in Prices

This paradox initiated an independent study into pricing based on the medications listed in the NCCI report. The study identified that prices offered by manufacturers of generic medications varied significantly, and that a lack of awareness by claims administrators could be a leading factor in the high cost of pharmaceuticals in workers’ compensation. The study excluded repackagers’ prices, which are often associated with physician-dispensing. The report published from this study listed the following medications:

  • Meloxicam 7.5mg tablet — prices ranged from four cents through to $5.73.
  • Gabapentin 300mg capsule — six cents through to $1.75.
  • Lidocaine 5% transdermal patch (30 patches) — $102.98 through to $258.97.
  • Hydrocodone-Acetaminophen (“APAP”) — from 22 cents through to $2.69 per unit, depending on the strength. The price for Acetaminophen with Codeine ranged from 15 cents through to 90 cents per unit.
  • Omeprazole 20mg — from 29 cents through to 65 cents.
  • Cyclobenzaprine HCL 10mg tablet — from four cents through to $1.13.
  • Oxycodone HCL — from 23 cents through to $1.57 depending on strength.
  • OxyContin — a brand name extended release or long acting Oxycodone HCL, only manufactured by Purdue Pharma and currently under a protection period, ranged from $2.27 through to $14.51 per unit based on strength.

The Solution

For claims administrators to influence a downward trend in pharmaceutical costs associated with pricing, consideration should be given to the following initiatives:

  1. Know the suppliers of the medications in the PBM/PBN’s formulary.
  2. Compare the suppliers of the PBM/PBN’s formulary to the Medi-Cal formulary to ensure at least the lower prices available from Medi-Cal suppliers are being paid.
  3. Pay only the “no substitute allowed” price when a prescribed medication is not included in the PBM/PBN’s formulary.
  4. When an MPN’s physician dispenses medications, ensure that (a) the “no substitute allowed” price is not paid and (b) the lowest available price is paid for a medication from a supplier listed in the Medi-Cal formulary, unless a lower contracted rate is already in place within the MPN.
  5. Analyze the paid price for pharmaceuticals on at least a monthly basis to ensure the lowest price for a medication has been paid regardless of supplier and monitor medications most frequently dispensed along with their quantities to ensure PBMs/PBNs and physicians are dispensing the lowest cost medication identified in the Medi-Cal formulary, unless a lower contracted rate is already in place.

A claims administrator’s processes and technologies to manage the pharmacy vendor relationships, pre-authorizations and bill reviews must be seamlessly integrated and be able to capture data at the most granular level, which in the case of pharmaceuticals in the U.S. is the National Drug Code (NDC). Without this detailed integration, pharmaceutical costs associated with pricing will continue to increase, as illustrated in California, regardless of legislation changes enacted in the future.

The report relating to this study is available in PDF format from the website managingdisability.com under the Dialogue tab.