Physician-Dispensed Drug Prices in Tennessee Decreased About 30%, Yet Remained 10-30% Higher Than Pharmacy Prices

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The WCRI study, Early Impact of Tennessee Reforms on Physician Dispensing, examines the early results of Tennessee’s changes to the rules governing reimbursement to Tennessee physicians for prescriptions that they both write and dispense.

Sample chart from study.

Sample chart from study.

The research finds, based on the early post-reform data, the new regulations did not discourage physicians from continuing to dispense these drugs at lower prices, which was a concern.

Physician-dispensed drug prices in Tennessee decreased about 30 percent after reforms, yet remained 10–30 percent higher than pharmacy prices, according to a new study from the Workers Compensation Research Institute (WCRI).

“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 Tennessee adopted new rules, effective August 9, 2012, to address the rapid increase in physician dispensing and associated costs. The research finds, based on the early post-reform data, the new regulations did not discourage physicians from continuing to dispense these drugs at lower prices, which was a concern.”

The study, Early Impact of Tennessee Reforms on Physician Dispensing, examines the early results of Tennessee’s changes to the rules governing reimbursement to Tennessee physicians for prescriptions that they both write and dispense. Tennessee 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-dispensed prescriptions.

The following are among the study’s findings:

  •     Physician dispensing remained nearly as common after Tennessee’s rule changes. In the second quarter of 2012 (pre-reform), 25 percent of prescriptions were dispensed at physicians’ offices. The same figure was 21 percent in the first quarter of 2013 (post-reform). Recognizing that the data only reflect early post-reform experience, the result is important to note because advocates for physician dispensing argued that such changes would make it more difficult for patients to fill prescriptions at their physicians’ offices.
  •     The average prices paid per pill decreased by 21–49 percent for most of the top physician-dispensed drugs, which represented 71 percent of all physician-dispensed prescriptions. For six of the top drugs, the average prices decreased by 26–39 percent. The price reductions were consistent with the goals of Tennessee’s rule changes.
  •     Despite these price reductions, the prices paid per pill for most of the common physician-dispensed drugs remained 12–28 percent higher than pharmacy prices for the same medications. One major reason for this difference is that prices paid to pharmacies reflect discounted prices below average wholesale price (AWP), primarily as a result of pharmacy benefit managers (PBMs) contracting with retail pharmacies. Physician-dispensed prescriptions typically do not go through PBMs and, therefore, are not subject to PBM discounts.    

The data used in this analysis came from payors in Tennessee that represented 55 percent of all medical claims in the state workers’ compensation system, covering physician- and pharmacy-dispensed prescriptions filled by injured workers through March 2013. WCRI intends to update these results in the next edition of this study with more recent 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 about this report or to purchase a copy, visit http://www.wcrinet.org/result/tn_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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