Doctors overcharge on workers' comp medicine, critics say

Pills can cost three times as much — or more

December 28, 2013|Luke Broadwater, The Baltimore Sun

When Marylanders purchase the painkiller Vicodin, it costs about 37 cents a pill at a pharmacy.

But when a doctor dispenses it under Maryland's workers' compensation system, the cost per pill can increase dramatically, officials and doctors acknowledge.It sells for $1.46 a pill, four times the standard cost, according to a study by the Massachusetts-based Workers Compensation Research Institute.

The pain reliever Percocet is no better: When dispensed by a doctor, it's four times more expensive for local governments and private employers who foot the bill in the workers' compensation system, the study found. And muscle relaxer Soma? It's nearly 700 percent more costly when handled by a doctor.

As local governments and insurers seek to rein in costs of the program that pays workers who are injured on the job, they're highlighting such disparities and targeting physician-dispensed drugs — while setting up a potential battle in the next General Assembly session.

Some governments in Maryland are simply refusing to pay high prices for medication; Anne Arundel County, for example, says it saves $100,000 a month — more than a $1 million a year — by holding the line on such costs. Statewide legislation that would limit the doctors' practice known as "repackaging" has been prepared for the 2014 General Assembly; six states across the country have already banned the practice.

Payments under Maryland's workers' compensation system affect both private employers and government entities, but governments are typically the hardest hit — meaning that taxpayers pay up, too. Of the 10 employers with the highest costs in Maryland, eight are government entities.

"It's a lot of dough," said Jack Andryszak, an Annapolis lawyer who represents workers' compensation insurers. "It's a big deal benefiting a relatively small group who have found a loophole."

The push for change takes aim at repackaging, in which doctors buy prescription drugs from companies that take bulk quantities of pills and package them for doctors in ready-to-dispense containers with new federal identification numbers. After the repackager and doctor add their fees, the cost of the drug can spike.

$300,000 a year

Arizona-based IntegrityRx, one of the better-known drug repackagers, advertises on its website that doctors can make up to $300,000 a year by using its system. The company advises doctors to primarily target workers' compensation cases. In these cases, employers must cover 100 percent of the bill and some states like Maryland have set no limits on drug fees.

Doctors acknowledge that repackaging can lead to higher costs for taxpayers and companies, but they say the practice is convenient for injured workers and speeds up treatment. Costs can increase because many doctors' offices are small operations that cannot benefit from economies of scale — just as so-called "mom and pop" stores charge more for goods than Walmart.

"Physicians have been dispensing since the Middle Ages," said Gene M. Ransom III, chief executive officer of MedChi, the state medical society, which is lobbying against efforts to ban or limit physician dispensing. "It's done for patient convenience. The idea that you would limit patients' access to drugs is crazy."

Two bills in the approaching General Assembly session are expected to target physician costs. The first would exempt employers from having to pay for doctor-dispensed medication 30 days after the initial visit. The bill would still allow doctors to provide initial doses of medication, but thereafter patients would have to fill prescriptions at a pharmacy.

The second bill would exempt employers from being required to pay for narcotics dispensed by doctors, except under certain circumstances. That bill, backed by workers' compensation insurers, is meant to combat the problem of prescription-drug abuse and addiction by requiring doctors to receive authorization from an employer before dispensing narcotics, have the patient enter into a drug management plan or take a drug test.

Robert C. Erlandson, an Ellicott City lawyer who represents insurers, said he's worried about patients who miss work because of a legitimate injury and get hooked on prescription drugs.

"It's a huge problem," he said. "There's no end in sight for some of these patients, and they're not working."

More Maryland doctors are dispensing medication these days, according to the nonprofit Workers Compensation Research Institute, which is funded by a mix of employers, state governments, insurers and labor organizations. Physician-dispensed medications now make up 55 percent of the systems' prescription costs, up from 43 percent three years ago, even though they account for just 40 percent of the prescriptions.

The average price paid to dispensing physicians in Maryland is often more than double the prices charged by pharmacies such as CVS or Rite Aid, according to the institute, which released a study of Maryland's prices this fall.

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