Physician-Dispensed Drug Prices in South Carolina Decreased sbout 35%, Yet Remained 30–40% Higher Than Pharmacy Prices

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This WCRI study, Early Impact of South Carolina Reforms on Physician Dispensing, examines the effects of changes to the rules governing reimbursement to South Carolina physicians for prescriptions that they both write and dispense. South Carolina is one of 18 states that have made significant changes to such reimbursement rules in the past 10 years, motivated by concerns about the higher costs of physician dispensing.

Sample chart from the study.

Sample chart from the study.

Policymakers in South Carolina adopted new rules, effective December 19, 2011, which helped to narrow the price difference in post-reform South Carolina.

A new study from the Workers Compensation Research Institute (WCRI) found physician-dispensed drug prices in South Carolina decreased about 35 percent yet remained 30–40 percent higher than pharmacy prices.

“In many states across the country, policymakers are debating whether doctors should be paid significantly more than pharmacies for dispensing the same drug,” said Dr. Richard Victor, WCRI’s executive director. “Policymakers in South Carolina adopted new rules, effective December 19, 2011, which helped to narrow the price difference in post-reform South Carolina.”

The study, Early Impact of South Carolina Reforms on Physician Dispensing, examines the effects of changes to the rules governing reimbursement to South Carolina physicians for prescriptions that they both write and dispense. South Carolina is one of 18 states that have made significant changes to such reimbursement rules in the past 10 years, motivated by concerns about the higher costs of physician dispensing.

Using data covering the time period from 2011 to the first quarter of 2013, the following are among the study’s findings:

  • Average prices paid for physician-dispensed prescriptions decreased after South Carolina’s rule changes. For most of the top physician-dispensed drugs, the average prices paid per pill decreased by 33–52 percent after the reforms. For example, the price paid for physician-dispensed hydrocodone-acetaminophen (Vicodin®) decreased from $1.18 per pill pre-reform in the last quarter of 2011 to $0.56 per pill post-reform in the first quarter of 2013, a decrease of 52 percent.
  • The prices paid to physicians for some common drugs were still higher than pharmacy prices for the same drugs in post-reform South Carolina. For example, ibuprofen (Motrin®) was $0.27–$0.28 per pill when dispensed at a pharmacy, but $0.39–$0.41 per pill when dispensed at a physician’s office, a price difference of 42–44 percent.
  • After the pharmacy fee schedule change in the last quarter of 2011, the frequency of physician dispensing appeared to decrease steadily over the post-reform quarters. The percentage of all prescriptions dispensed by physicians dropped from 23–24 percent in the pre-reform quarters to 13 percent by the last quarter of 2012 and 10 percent by the first quarter of 2013.
  • Prescriptions for some common drugs with over-the-counter strengths were often written and dispensed by physicians who dispense drugs. This was the case for naproxen sodium (Aleve®) of 220 milligrams. The average price paid to physicians for this drug was between $0.21 and $0.24 per pill in post-reform South Carolina, but the over-the-counter price for the same drug was $0.09 per pill if filled at a local pharmacy.

The data used in this analysis of South Carolina’s pharmacy fee schedule reform came from payors in South Carolina that represented 47 percent of all medical claims in the state workers’ compensation system. The analysis data was constructed so that, for each quarter, prescriptions filled within the quarter for medical claims that had up to two years of maturity were included. On average for each of the calendar quarters, WCRI included 13,910 prescriptions paid that are associated with 3,912 claims in the state. Note that the post-reform results depict the impact of the reform during 15 months after the effective date. WCRI intends to update these results with additional data.

The Cambridge-based WCRI is recognized as a leader in providing high-quality, objective information about public policy issues involving workers' compensation systems.

For more information or to purchase a copy of this study, visit http://www.wcrinet.org/result/sc_pd_2014_result.html.

ABOUT WCRI:

The Workers Compensation Research Institute (WCRI) is an independent, not-for-profit research organization based in Cambridge, MA. Organized in late 1983, the Institute does not take positions on the issues it researches; rather, it provides information obtained through studies and data collection efforts which conform to recognized scientific methods. Objectivity is further ensured through rigorous, unbiased peer review procedures. WCRI's diverse membership includes 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.

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Andrew Kenneally
Workers Compensation Research Institute
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