Monday, March 11, 2013

The Louisiana Approach to Repackaging

How long do you think someone from the drug repackaging industry will take to figure out around this little issue?

The Louisiana Court of Appeals ruled that a doctor who dispenses medications to an injured worker cannot assign his interest in being paid for his services to the pharmaceutical company that gave him the drugs.

In 2007, Physician Partner, a pharmaceutical repackager located in Thousand Oaks, Calif. whose parent company is Rebel Distributors Corp., contracted with Dr. Thomas Heard, an orthopedic surgeon and proprietor of the St. Thomas Clinic in Louisiana, for the provision of 27 different medications for his workers' compensation patients. 

The contract provided that the medications would be provided to Heard on a consignment basis, and his clinic would dispense the medications directly to his patients without a prescription. Physician Partner would then send an invoice to the patients' employer and/or workers' compensation insurer demanding payment.

In August 2008, work comp carrier LUBA Casualty informed Physician Partner that it would no longer provide reimbursement for physician dispensed medications. Physician Partner sued LUBA to collect on medications that Heard had dispensed to patients whose employers were insured by the carrier.

At the summary judgment hearing the trial court ruled in favor of LUBA, on the grounds that Physician Partner had no right of action against LUBA because it was not a health care provider or an agent of a health care provider as defined in the Louisiana Workers' Compensation Act.

So Physician Partners went back to the drawing board and presented a new contract with Heard that defined the relationship as one of "agency."

Trial ensued and the court ruled in favor of Physician Partners, but said reimbursement was to be based on the manufacturer's average wholesale price for the drug.

Physician Partners didn't like that it couldn't get its 500% to 800% markup, and LUBA was offended that it had to pay anything at all. So both appealed.

The Court of Appeals concluded that the original 2007 agreement between Physician Partner and Heard was for the "assignment of a non-assignable right to collect for the health care services provided by Dr. Heard to his patients."

The court also concluded that the second, replacement, contract "cannot retroactively breathe new life into the attempt by Rebel Distributors/Physician Partner to collect an assigned workers' compensation medication claim."

Ergo, Physician Partners did not get reimbursed on about $150,000.

And I say GOOD.

Of course the issue isn't over. Rumor has it that drug repackagers are going to the legislature, as they have in Florida.

There is no justifiable reason for physician dispensing beyond sample prescriptions to get the patient quick relief. Not only are there pharmacies everywhere except for the most remote of locations, but prescriptions can be filled on-line, by mail, and various other ways. A physician does not, and should not, be the point of distribution for prescription medication.

The only reason for a physician to dispense medication beyond sample sizes is for profit, and that creates an inherent conflict of interest, particularly in the fact pattern in this case, where the dispensing physician has no risk in the game and all business functions are handled by the marketing/supply firm that is providing the drugs and receivables services.

Some states limit the amount of reimbursement that physicians can get on repackaged drugs, and others just prohibit the practice all together. Both methods work.

The Louisiana court's approach also works.


Related story this morning in the Wall Street Journal:

Oregon, Colorado, Washington and Idaho have the nation's highest rates of prescription-drug abuse according to a new survey. Drug-trafficking rings have sprouted in Washington, Colorado and other sparsely populated Western states since 2009, according to law enforcement.

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