Calif. Attempts to Rein in Workers’ Comp Compound Drug Costs

May 3, 2011

California legislators are considering a bill aimed at reigning in the use of compound drugs in workers’ compensation claims.

According to Assembly Bill 378, existing law provides that it is unlawful for a physician to refer a person for specified medical goods or services , whether for treatment or medical-legal purposes , if the physician or his or her immediate family has a financial interest with the person or in the entity that receives the referral. The bill under discussion would add pharmacy goods to the list of medical goods or services for which it is unlawful for a physician to refer a person.

“Since the creation of the official medical fee schedule governing pharmaceuticals, there has been a growing practice by some prescribing physicians to utilize medications that are not covered by the fee schedule, to dispense these medications directly to workers’ compensation patients, and to bill employers and insurers at highly inflated rates,” the bill text states. “One of the ways that these physicians accomplished the goal of billing at inflated rates was by repackaging common medications from bulk supplies so that the packages did not have fee schedule codes, and dispensing them in common amounts at prices far above the fee schedule for the same products sold through pharmacies.”

Existing law requires the administrative director to adopt and revise periodically an official medical fee schedule that establishes reasonable maximum fees paid for medical services, other than physician services, and for other prescribed goods and services. AB 378 would, for pharmacy services, drugs, or other pharmacy products not covered by a Medi-Cal payment system, instead make the maximum fee 83 percent of the average wholesale price of the lowest-priced product of equivalent therapeutic effect. And until the administrative director adopts an official medical fee schedule for compounded drug products, would not allow a fee for a compounded drug ingredient.

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