Tags
antianxiety agent, AWP, Joe Paduda, ndc, Physician Dispensing, prescription drugs, vp marketing, wholesale price, Workers' Compensation
By Matt Schreiber, VP Marketing and Regulatory
By now you should be completely aware that physician dispensing is on the rise. NCCI, WCRI, national blogs, and even news agencies are reporting this. So why has this become the new metric to watch and manage? It’s simple. The average cost of medication dispensed at a physician’s office vs. the cost of the exact medication dispensed at a pharmacy carries an average increase of more than 95%, nearly doubling the cost. In some cases, the medications are anywhere from 5 to 9 times more costly. There are a few cases where the medication is actually less, but these are rare.
How can a physician charge more for a medication if there is a state mandated fee schedule?
This is where loopholes and tricks become a reality and a nightmare for controlling costs. Every drug has a National Drug Code (NDC). NDCs are assigned to medications based on the strength and formulation, size of the package, and the labeler. Labelers are considered manufactures, and by right, have the ability to assign a new NDC when they move pills from one container to a new one for distribution. By virtue of the fact that the medicine has moved from one bottle to the next, they can assign a new NDC. Along with assigning a new NDC, the repackager can also assign a new Average Wholesale Price (AWP). In many cases, the new AWP is grossly inflated.
The medicine with the new NDC and increased price is ready to be dispensed by physicians, legally. The old AWP and the new AWP are off by as much as 900%. Using the new increased AWP to calculate the cost of the medication in concert with a state mandated fee schedule, the cost is higher. For example, the cost for a 30-day supply of an antianxiety agent is $24 at a pharmacy using a non-repacked AWP, but when dispensed through a physician’s office using a repackaged NDC’s AWP, the price is $51.90. No laws have been broken, but the price of the pill has been increased. Unless regulatory changes are made, the practice is considered legally appropriate.
Who is gaining from these increased costs?
Certainly physicians that are dispensing these medications are making money in the process. Some national reports indicate that physicians are using this income to offset reduced payments from other parts of their practice. Regardless of the reasons behind the need for increase revenue, they are standing behind these key principles1:
1. The physician wants the patient to start taking the drug immediately and dispenses enough medication to last until the patient can get to a pharmacy,
2. The physician cannot be sure what the right medication or dosage should be, and dispenses a few days’ supply of medication to determine whether that course is effective,
3. It might be inconvenient for the patient to get to a pharmacy
The repackager is also making money in the process. It’s a business, with big dollars attached and even bigger battles within the various state’s government.
What does this mean for you and your organization?
Until states places policy parameters around this practice, the physician-dispensed medications will continue to be more costly. Ultimately there will be an increase to the cost of a claim from the pharmaceutical side, and arguably there could be an increase in the amount of physician office visits to fuel this revenue stream.
What is being done about it?
Many states have made significant changes in order to reduce the increased costs. Some states have mandated that the original NDC be used for AWP pricing purposes and others have simply outlawed physician dispensing. Texas has outlawed the practice, while Oklahoma, South Carolina and others have required the original NDC’s AWP to be used as part of pricing. Colorado recently made a significant change allowing the practice of repackaging with increased AWP prices legal only for the first 30 days from the Date of Injury (DOI). After the 31st day from the DOI, the repackaged medication must be priced using the original NDC and AWP.
Florida is currently debating this practice with a bill moving through the House and Senate seeking to close the so-called drug repackaging loophole. Previously a bill passed regulations around this practice – only to have the exiting former Governor push it back to the new administration.
Joe Paduda, author of Managed Care Matters and principal of Health Strategy Associates, recently blogged about this particular situation, 2. In relation to money being donated to politicians, Joe posted, “The donations, to individual politicians and their affiliated organizations come as the Florida Senate is considering a bill that would limit reimbursement of physician-dispensed drugs to the cost of the underlying (non-repackaged) drug.”
As a standard practice, myMatrixx continues to work with our customers by analyzing their data, reducing transaction cost where appropriate, communicating with physicians and pursuing the appropriate changes via legislative action. Our clients and prospects can also participate by encouraging elected officials to “do the right thing” and pass regulatory change that either significantly reduces the reimbursement on physician dispensed medications or outlaws it completely. The end result will yield the opportunity for companies to reduce their overall Workers’ Compensation premiums and refocus those dollars towards more productive ventures.
1Lipton, Laws, Li. 2011. NCCI Workers’ Compensation Prescription Drug Study. NCCI Research Brief. Retrieved from https://www.ncci.com/documents/2010_ncci_research_rxdrug_study.pdf
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