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House of Representatives
Session of 2013 - 2014 Regular Session


Posted: October 18, 2013 03:59 PM
From: Representative Marguerite Quinn
To: All House members
Subject: Repackaged Pharmaceutical Reimbursement Rates
With increasing regularity, doctors nationwide are electing to dispense the drugs they prescribe directly from their offices instead of sending patients to drugstores or pharmacies to get prescriptions filled. Physician dispensing of drugs is by no means a new practice- doctors are permitted to dispense the medications they prescribe in 42 other states with varying levels of restriction and regulation.

Numerous studies have indicated rapid growth in the prevalence of physician dispensing in Pennsylvania, specifically within the workers’ compensation system. This practice dramatically inflates costs borne by insurance companies, employers, and ultimately, by taxpayers.

Physician dispensing begins when drug distributing firms purchase large quantities of drugs (e.g. 1,000 to 10,000 tablets) and repackage the drugs into single prescription sizes (e.g.14, 21, 28 tablets) appropriate for dispensing directly to patients. As part of the repackaging process, drugs are assigned a new National Drug Code (NDC) and inherit a new average wholesale price (AWP), one which is typically far greater than the AWP established by the original manufacturer.

Although Pennsylvania’s pharmacy fee schedule sets the maximum reimbursement rate at 110 percent of the AWP for workers’ compensation pharmaceuticals, the artificial and inflated AWP of repacked drugs allows doctors, middlemen, and drug distributing firms to earn millions of dollars in the name of “patient convenience”. To maximize profitability, some health providers have begun to write long-term prescriptions for the drug they dispense, exacerbating the problem for insurers.

In the near future, I will introduce legislation to regulate and reform the practice of physician dispensing within the Pennsylvania workers’ compensation system. Specifically, my legislation will:
  • Require physicians to include the original drug manufacturer’s National Drug Code on bills they submit for reimbursement
  • Establish a maximum reimbursement rate of 110 percent for physician-dispensed drugs
  • Prohibit the use of repackaged National Drug Code numbers
  • Limit physician dispensing to drugs needed in the first five days following initial treatment
  • Ultimately decrease costs in the workers’ compensation system without sacrificing the quality of healthcare services received by patients
These commonsense reforms are supported by the Pennsylvania Chamber of Business and Industry, the NFIB of Pennsylvania, the Insurance Federation of Pennsylvania, and numerous industry interest groups.

Introduced as HB1846