State Workers’ Compensation Reform Efforts Do Not Address Some Prescription Drug Costs

Recent reforms to the workers' compensation system that placed new limits on prescription drug prices sold through pharmacies do not address physicians and clinics who sell "so-called repackaged drugs" directly to their patients, the Los Angeles Times reports. Drug price increases by physicians cost employers and insurers in the state more than $250 million a year, according to preliminary results from a University of California-Berkeley study.

Berkeley researcher Frank Neuhauser estimated that 40% of the $660 million spent annually on workers' compensation prescriptions could be attributed to sales by doctors at premium prices.

According to a price list for repackaged drugs from DispenseXpress, doctors can buy ibuprofen for $9.19, and then charge insurers $74.69 for the drug. Doctors can purchase a 90-tablet bottle of 350-milligram carisoprodol, a generic version of a muscle relaxant, and bill insurers for $518.49. Ibuprofen and carisoprodol, if sold at a pharmacy under workers' compensation rules, would cost insurers $12.81 and $41.19, respectively.

However, costs "can vary widely among repackagers" and some drugs are billed "at more modest markups," the Times reports.

Doctors said the practice of selling repackaged drugs has allowed them to treat patients more quickly and efficiently. They said markups cover the cost of purchasing the drugs and maintaining an inventory, in addition to the cost of billing insurers.

Sen. Jackie Speier (D-San Mateo) has proposed a bill that would clamp down on doctors' profits from repackaged drugs. The Senate on May 26 approved the bill, and the Assembly is expected to take up the bill when the Legislature reconvenes this week.

Gov. Arnold Schwarzenegger (R) has not taken a position on the bill.

The California Medical Association has asked that legislative action be postponed until next year so that repackaged drugs can be studied further (Lifsher, Los Angeles Times, 8/14).

A report issued last week finding that workers' compensation rates fell about 26% over the last two years "prompted a round of boy-aren't-we-great comments from California's leading politicians," but "the Sacramento set hardly deserves the credit," a San Diego Union-Tribune editorial states. "California's rates are still among the nation's highest, and a staggering amount of money is still extracted by lawyers and other middlemen instead of going to those actually hurt on the job," according to the editorial (San Diego Union-Tribune, 8/15).