Doctors propose limiting charges on workers' compensation pills

Facing criticism from Baltimore and nearby counties over high drug bills, doctors who prescribe marked-up medication under Maryland's workers' compensation system have proposed capping their prescription fees.

But the doctors' proposal would allow them to charge up to between 130 and 150 percent of pharmacy rates for drugs, plus a $12 fee for each prescription and a 20 percent penalty if counties don't pay — legislation that, if passed, municipalities say would cost them millions of dollars more than what pharmacies charge for pills.

Andrew Smullian, an aide to Baltimore Mayor Stephanie Rawlings-Blake, submitted documents that he said showed the markups could cost the city $1.6 million per year.

"Our opposition is due to the significant negative fiscal impact this bill would have on the City of Baltimore," Smullian wrote in a letter stating the city's objections.

The state medical society, which is backing the proposed fees, says it is trying to address concerns that doctors who prescribe to injured workers and middlemen known as "repackagers" are driving up costs by as much as 700 percent in the case of some pills.

"The predictable opponents ... will be lobbyists from workers' compensation insurers who will argue that [the proposed fee cap] is much 'too high,'" wrote lawyer Joseph A. Schwartz III, who represents MedChi, the doctors' group.

"However, these are the same individuals who have argued [that] some doctors are charging on a 'per pill' basis 400% to 600% more than charged by the retail pharmacy. How can a reduction from 600% to 130% not be helpful to these insurers?"

The legislative fight takes aim at repackaging, in which doctors buy prescription drugs from companies that take bulk quantities of pills and put them 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.

Maryland doctors who dispense under the state's workers' compensation system charge four times more than pharmacies for pills of painkillers Vicodin and Percocet and nearly seven times more for muscle-relaxer Soma, according to the Massachusetts-based Workers Compensation Research Institute.

The 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.

But some local officials in Maryland say fees have gotten so bad that they 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.

The officials and insurers for private businesses are backing two bills 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.

"Allowing physicians and repackagers to continue to charge employers and insurers drastically high rates for prescriptions prescribed and dispensed within a physician's office for workers' compensation is problematic," wrote Deriece Pate Bennett, a vice president with the Maryland Chamber of Commerce in opposition to the bill. "Physicians should not be allowed to dispense medication for mere personal profit at the expense of the workers' compensation system or the employees' health."

Baltimore County's law office wrote in testimony that it could support the proposed fee schedule if it is amended to say that doctors cannot charge more than pharmacies for workers' compensation medication.

More Maryland doctors now are dispensing medication than in the past, 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.

And the practice can be lucrative. 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 target workers' compensation cases. In these cases, employers must cover 100 percent of the bill. Some states, including Maryland, have set no limits on drug fees.

IntegrityRx recommends on its website that physicians target workers' compensation cases because "the reimbursement rules for workers' compensation and the nature of on-the-job injuries make workers' compensation prescriptions the easiest and most financially beneficial prescriptions for you to dispense."

Under the workers' compensation system, patients make no co-pays on the cost of medical care or drugs.

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

Six states have banned physician dispensing and 14 have placed limits on how much doctors can charge. Some of the laws have had immediate impact. For instance, in Georgia, which bans physician dispensing, the price of Soma dropped by 75 percent, from $2.54 per pill to 63 cents, according to the research institute.

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