Insurers Opposed to Calif. Workers’ Comp Bill

May 5, 2010

A workers’ compensation bill slated for a California committee hearing this week could increase pharmacy costs and fails to address underlying problems that are currently driving up system costs, according to the Association of California Insurance Companies Vice President Mark Sektnan.

The bill, AB 2593 by Assemblyman Steve Bradford, D-Inglewood, would de-link the state’s official medical fee schedule for pharmacy services from the Medi-Cal schedule for pharmacy reimbursement.

Sektnan said, “The bill would replace this easily understood fee schedule with a convoluted system of various pricing options that could result in increased workers compensation costs.”

Moreover, he said the bill ignores significant issues that are increasing workers compensation pharmacy costs, including the use of compound drugs and third-party companies that bill insurers for drugs at more than the rate negotiated between pharmacy companies and insurers.

There is clear evidence of a sharp increase in workers compensation pharmacy costs, Sektnan said. A 2009 study by the California Workers’ Compensation Institute compared first-year prescriptions and pharmaceutical payments for claims from accident year 2002 to 2007. Researchers found that the average number of prescriptions per claim rose steadily from 3.3 in 2002 to 5.0 in 2007 — up nearly 52 percent over the six-year span. At the same time, average first-year prescription payments jumped from $269.05 to $461.90, or nearly 72 percent. Overall, for the post-reform period of 2005 to 2007, the average number of first-year prescriptions per claim was up 25 percent, while first-year prescription drug payments per claim rose 35.6 percent.

He noted that these increasing costs cannot be adequately controlled by adjustments to the fee schedule. Effective containment of pharmacy costs requires more substantive reforms, including: 1) a prohibition against the practice of drug compounding as a means to avoid the fee schedule and 2) a requirement that third-party firms bill at the pre-negotiated contract rate when billing for accounts they were assigned through a purchase.

“The inclusion of these provisions in AB 2593 would provide relief from some of the easily identifiable inflationary drivers of pharmacy costs,” Sektnan said. “ACIC believes that AB 2593 provides an excellent opportunity to have a meaningful dialogue on pharmacy costs and we urge consideration of amendments that would achieve significant constraints on costs.”

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