The Effect of Drug Fee Schedules and Other Factors on Workers’ Comp Prescription Drug Costs

By Roger Rabb, J.D., Special Correspondent for the LexisNexis Workers’ Compensation eNewsletter

NCCI studies have shown that establishing a fee schedule for physician services can help keep down costs in workers’ compensation claims, and in “The Impact of Workers Compensation Drug Fee Schedules” (Sep. 2015), NCCI researchers similarly examine the effect of prescription drug fee schedules on drug prices in workers’ compensation claims. Their findings are similar to those in the physician fee schedule studies: a prescription drug fee schedule can help control drug costs, if not set too high, but other factors also contribute to those costs.

For their study, the researchers examined data from the NCCI’s Medical Data Call for services provided from 2011 through 2013 for 42 states. Of the included states, 26 had a prescription drug fee schedule based on the Average Wholesale Price (AWP) as published by commercial publishers of drug pricing data. The other 16 states did not have a prescription drug fee schedule.

For those states with a fee schedule, the Maximum Amount Reimbursable (MAR) for a prescription drug is usually calculated by multiplying the number of units (the number of capsules or tablets) by the AWP and by a multiplier established in that state. A dispensing fee is then usually added to that result to get the MAR. Within each state, multipliers and dispensing fees can vary depending on the type of drugs. For example, brand-name drugs may have different multipliers and fees than their generic counterparts. The study divided the states into four categories: low-fee-schedule states, with multipliers below 100% of the AWP (8 states); medium-fee-schedule states, with a 100% multiplier (13 states); high-fee-schedule states, with a multiplier greater than 100% (5 states); and the 16 states with no fee schedule.

Impact of Fee Schedules

Because some of the variation could be attributed to the different mix of drugs being prescribed in the different states, and also to differences in network participation among the states, the researchers also looked at the average price per unit after adjusting each state to contain the same mix of drug types and ratio of in-network to out-of-network services. While this adjustment helped to minimize the range of prices, some variation still existed even within each group. The low-fee-schedule states had an adjusted average of $1.63, compared to $1.73 for both the medium-fee-schedule states and the no-fee-schedule states, and $1.78 for the high-fee-schedule states. As this shows, while a fee schedule can help contain drug costs, the states with a high fee schedule, with a multiplier greater than 100% of the AWP, actually had a higher per unit drug price than states without a fee schedule.

Other Impact Factors

In general, drug costs tended to be lower in low-fee-schedule states than in states from the other groups. For example, while in low-fee-schedule states about 70% of transactions were below the AWP, only about 55% of the transactions from high-fee-schedule states were below AWP. In addition, the median price per unit in the low-fee-schedule states was about 70 cents per unit, while the median in the other groups was about 90 cents per unit.

However, the researchers found that having a low drug fee schedule did not necessarily correlate with lower drug costs and, as noted, factors other than fee-schedule type played a role. The researchers looked specifically at the impact of three other factors: whether the drugs sold were brand-name or generic, whether the drugs were dispensed by physicians rather than pharmacists, and whether the transactions were in-network or out-of-network.

Their findings?

• Brand-name drugs accounted for more than half of the workers’ compensation prescription drug costs, even though these drugs constituted only one quarter of the prescription drug transactions. Brand-name drugs tended to pay closer to the MAR than the generic equivalents.

• The cost per unit of prescription drugs dispensed by physicians was generally higher than when the drugs were dispensed by pharmacists.

• In-network prescription costs per transaction, the rates for which are generally negotiated by the networks, were generally lower than out-of-network costs, with the latter being more likely to pay at closer to the MAR.

Conclusion

This study shows that, as with physician fee schedules, prescription drug fee schedules can help contain workers’ compensation drug costs, if the fee schedule generally remains at or below the AWP. As noted, however, other factors, including the use of generic drug equivalents, pharmacy dispensation, and workers’ comp networks, are also important.

© Copyright 2015 LexisNexis. All rights reserved.