Friday, October 14, 2011

When Negative Legislation has a Silver Lining

Sometimes there are positive unintended consequences to legislation providing in theory win-win situations to constituencies that one would otherwise think to be diametrically opposed.

As an example, California Gov. Jerry Brown last week signed a bill to eliminate the profit motive for prescribing compound drugs, an important legislative victory for the employer community. 

But pharmacists say the governor's signature on the bill also demonstrates the state's approval of compound drugs in the workers' compensation system.

AB 378 (Solorio, D-Santa Ana) addresses pharmacy goods, including compound drugs, medical foods, co-packs and durable medical equipment, as well as physician-dispensed over-the-counter medications. The bill adds these pharmacy products to the list of goods for which physician self-referral is prohibited.

The law provides that compound medications must be billed at the ingredient level and reimbursed at the Medi-Cal rate for each ingredient as identified by its national drug code (NDC). Ingredients that do not have an NDC are not reimbursable under the new law. If a physician dispenses a compounded medication, the bill limits reimbursement to 300% of documented paid costs, not to exceed $20.

The employer/carrier community felt that there was a loophole in the pharmaceutical control laws based on evidence such as a report by the California Workers' Compensation Institute in August 2010 which found that compound medications, convenience packs and medical foods accounted for 2.3% of drug costs in the first quarter of 2006, but climbed to 12% of prescription drug costs in the first quarter of 2009. During this same time period, CWCI said the average payment for compound drugs increased from $468 to $591.

Jason Schmelzer, chief lobbyist for the California Coalition on Workers' Compensation, told WorkCompCentral that, "the spike in compounds was clearly related to financial incentives for physicians and facilitated by certain companies that figured out and helped them take advantage of the system." The new law was intended to curb those abuses.

Bruce Curnick, vice president of Landmark Medical Management, told WorkCompCentral that the bill will clean up some abuses of the system, but it largely leaves compounding unaffected and that while the legislation caps reimbursement for medications dispensed by a physician, those limitations will apply only to doctors who do the compounding in their offices because of the definitions of "administer" and "dispense" as found in the California Business and Professions Code.

There is concern with the reimbursement rate being set too low. Jon Roth, chief executive officer of the California Pharmacists Association, said he can appreciate the comment that the bill appears to legitimize the use of compound drugs but felt the Medi-Cal reimbursement rate is too low.

But AB 378 provides that the administrative director of the Division of Workers' Compensation has the authority to make regulatory changes to prevent a reduction when the methodology for determining reimbursement rates in Medi-Cal changes from the average wholesale price to the average acquisition cost. This may help out the pharmacy sector from rates that make it difficult to provide medications in the work comp system.

I'm an optimist by nature, but occasionally even I am surprised when an interest group sees a positive benefit from a legal change that would otherwise be deemed negative. The world continues to surprise me!
workers compensation

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