Florida lawmakers appear headed toward a stalemate over how to rein-in the cost of physician-dispensed workers’ compensation prescription drugs. In an effort to force a deal, Senate lawmakers are calling for a statewide average 2.5 percent rate cut if a bill is passed, even if the rate cut is not actuarially justified.
Reducing the cost of physician-dispensed repackaged prescription has been a top priority for business groups such as the Florida Chamber and Associated Industries of Florida and insurers during this year’s legislative session.
At issue is the amount of dollars physicians can charge insurers when they directly dispense prescription drugs to injured workers out of their office.
Florida’s workers’ compensation law specifies that pharmacies are to be reimbursed at a drug’s average wholesale price, plus $4.18. However, the law is silent when it comes to doctors who sell and repackage drugs in their office. As a result, there has been a sharp increase in the number of physician-dispensed drugs, with several studies showing markups as high as 600 percent or more.
An insurance industry’s rating organization, the National Council on Compensation Insurance (NCCI), calculated that in 2003, only nine percent of drugs were dispensed by doctors. NCCI says that number has now risen to more than 50 percent, making Florida the highest of 46 states.
NCCI calculated that out of an 8.9 percent rate increase approved by regulators earlier this year, 2.5 percent was directly attributable to physician-dispensed drugs, representing $62 million in additional costs to the state’s workers’ compensation system.
The House is moving forward with a bill that would limit physicians’ reimbursements to the pharmacy fee schedule. However, that proposal has been met with stiff resistance in the Senate.
The Senate Health Regulation Committee last week took up SB 668, sponsored by Alan Hays, which in its original form mirrored the House bill.
Associated Industries of Florida representative Tami Perdue, pointing to the NCCI study, said the bill is necessary to help reduce costs. “This would close a loophole to make workers’ compensation more affordable in the state,” she said.
That position has been heavily criticized by Automated Health Care Solutions, which provides physicians with the computer software to administrate their drug claims. The company has been an outspoken critic of NCCI’s figures, claiming they are not justified by the facts.
Physicians have also stepped forward to argue that the proposed change would effectively end the ability of doctors to provide repackaged drugs. As a result, they say, patients would be less likely to get their medicine and less likely as a result to return to work early.
“Don’t prevent us from taking care of patients,” said Gary Kelman, an orthopedic surgeon out of Broward County.
Senator Rene Garcia (R-Garcia) successfully convinced the committee to substantially alter the bill in a way that would heavily favor physicians over the interest of the business and insurer groups.
Under his amendment, insurers would be given a $15 credit on any repackaged drug costing more than $25. It would also force insurers to reimburse drug-dispensing physicians regardless of whether they have a contract with that physician. Insurers found improperly reimbursing those drug claims could face fines of $250 per incident, a figure that would increase to $1,000 if the insurer is found to have improperly pay claims 15 times in one year.
NCCI responded that the bill as amended would do the opposite of saving money and would increase costs.
For example, NCCI said the $15 credit would quickly be recouped by physicians since there are no controls on the cost per pill. The insurer penalties also would be likely cause insurers not to challenge claims, if for no other reason than to avoid the penalties.
NCCI said that if this amendment becomes law, workers compensation rates would be increased by 1.4 percent. The 1.4 percent associated with this amendment is not an offset to the estimated savings of 2.5 percent.
For his part, Hays vowed to kill his bill unless Senate lawmakers dramatically changed course, a sentiment shared by business groups and insurers.
“We’re going to get this thing back under control,” Hays said.
Rate Cut Possibility
In an effort to place pressure on a possible compromise with the House, Senate lawmakers are calling for a cut in workers’ compensation rates.
Senator Don Gaetz (R-Destin) convinced lawmakers to tack on an amendment to the Senate bill that would calls for a statewide average 2.5 percent reduction in workers’ compensation rates, effective July 1.
Lawmakers do have the power to implement rate changes without the consent of regulators. The House bill contains a similar rate cut, but requires it to be actuarially justified.
However, based on the NCCI’s analysis of drug costs on rates and the other provisions of the Senate bill, the rate reduction effectively would not be actuarially justified and would add to costs.
The Senate’s political posture, however, would place pressure on House lawmakers to compromise on the bill or face having to reject an election year proposed rate cut at a time when small employers are struggling and the state’s unemployment rate stands at around 10 percent.