Nearly Half of Rx Payments in Maryland Paid to Physicians Who Dispense Drugs at Their Offices—5th Highest Among 23 States Studied

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A new study, Physician Dispensing in Workers’ Compensation, from the Workers Compensation Research Institute (WCRI) examines the rapid growth of physician-dispensed pharmaceuticals for injured workers under state workers’ compensation in 23 states. This issue has been the subject of regulatory or statutory change in a growing number of states, and is currently being debated in a number of others.

Doctor writing a prescription.

Doctor writing a prescription.

There is a great discrepancy between what doctors and pharmacies charge for dispensing the same drug. One question for policymakers is whether the large price difference paid when physicians dispense is justified by the benefits of physician dispensing.

A new study, Physician Dispensing in Workers’ Compensation, from the Workers Compensation Research Institute (WCRI), examines the rapid growth of physician-dispensed pharmaceuticals for injured workers under state workers’ compensation in Maryland and 22 other states.

According to the study, 47 percent of all prescription drug spending in Maryland for injured workers was paid to physicians for drugs dispensed at their offices—not to pharmacies—up from 36 percent three years earlier.

This raises costs to employers since the prices paid to physicians were typically much higher than what was paid to pharmacies for the same drug. For example, the cost for the most commonly used drug, Vicodin®, quadrupled when dispensed by physicians compared to the pharmacy—an average of $1.48 per pill at the physicians’ offices versus $0.36 at the pharmacy.

Moreover, the study found that prices paid for physician-dispensed prescriptions increased for several drugs commonly dispensed by physicians, while prices paid to pharmacies changed little or fell. For example, the average price per pill paid to physicians for Vicodin® increased by 78 percent, 60 percent for Mobic®, and 24 percent for Flexeril® over three years while the prices paid to pharmacies for the same drug fell by 8 percent, 21 percent, and 19 percent respectively.

“There is a great discrepancy between what doctors and pharmacies charge for dispensing the same drug,” observed Dr. Richard Victor, WCRI’s Executive Director. “One question for policymakers is whether the large price difference paid when physicians dispense is justified by the benefits of physician dispensing. Policymakers can learn from the California reform experience, which is also analyzed in this study.”

Certain drugs were prescribed and dispensed by physicians in Maryland that were infrequently prescribed in other states where physician dispensing was not common. For example, 8 percent of the injured workers with prescriptions in Maryland received prescriptions for either Prilosec® or Zantac® as compared to less than 2 percent in most other states. When physicians dispensed, the average price paid per pill was $5.27 for Prilosec® and $3.91 for Zantac®, compared to $0.64 and $0.42 per pill when the same drug was purchased over-the-counter at Walgreens.

The data used for this study include nearly 5.7 million prescriptions paid under workers’ compensation for approximately 758,000 claims from 23 states over a period from 2007/2008 to 2010/2011. The 23 states in this study represent over two-thirds of the workers’ compensation benefits paid in the United States. These states include Arkansas, Arizona, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Wisconsin.

Several of the states in this study (Arizona, California, Georgia, South Carolina, and Tennessee) recently adopted reforms aimed at reducing the prices of physician-dispensed drugs.

For more information about this report or to purchase it, click on the following link:
http://www.wcrinet.org/result/phys_disp_wc_result.html.

About WCRI:

The Workers Compensation Research Institute (WCRI) is an independent, not-for-profit research organization based in Cambridge, MA. WCRI is a recognized leader in providing objective, credible, and high-quality information about public policy issues involving workers' compensation systems. WCRI's members include employers; insurers; governmental entities; managed care companies; health care providers; insurance regulators; state labor organizations; and state administrative agencies in the U.S., Canada, Australia and New Zealand. For more information about WCRI, visit our website: http://www.wcrinet.org.

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Andrew Kenneally
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