State Policies Affecting the Cost and Use of Pharmaceuticals in Workers Compensation: A National Inventory

Transcription

1 State Policies Affecting the Cost and Use of Pharmaceuticals in Workers Compensation: A National Inventory Richard A. Victor Petia Petrova Workers Compensation Research Institute With the assistance of: Linda Carrubba This report is protected under Copyright Law and is subject to the same use restrictions as a work printed on paper.

2 State Policies Affecting the Cost and Use of Pharmaceuticals in Workers Compensation: A National Inventory

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4 State Policies Affecting the Cost and Use of Pharmaceuticals in Workers Compensation: A National Inventory Richard A. Victor Petia Petrova With the Assistance of Linda Carrubba June 2006 WC Workers Compensation Research Institute Cambridge, Massachusetts

5 copyright 2006 by the workers compensation research institute all rights reserved. no part of this book may be copied or reproduced in any form or by any means without written permission of the workers compensation research institute. Library of Congress Cataloging-in-Publication Data Victor, Richard A. State policies affecting the cost and use of pharmaceuticals in workers compensation : a national inventory / Richard A. Victor, Petia Petrova, with the assistance of Linda Carrubba. p. cm. ISBN X 1. Workers compensation Government policy United States. 2. Drug utilization United States. 3. Prescription pricing United States. I. Petrova, Petia, 1970 II. Carrubba, Linda. III. Title. HD U6V dc publications of the workers compensation research institute do not necessarily reflect the opinions or policies of the institute s research sponsors.

6 Acknowledgments This study benefited greatly from the contributions of many individuals. We developed our survey of pharmaceutical cost containment strategies with the help of our colleagues Linda Carrubba and Stacey Eccleston. Many state officials contributed substantial time and expertise to completing the survey and responded to our many queries asking for clarification and validation. Our colleague Linda Carrubba provided expert administrative assistance as well as many organizational and substantive insights. We especially appreciate the thoughtful comments of our technical reviewers, Professor Peter Barth of the University of Connecticut and Dr. Leslie Wilson of the School of Pharmacy at the University of California, San Francisco. Their critiques of an earlier draft of the study raised issues that helped us improve the analysis presented in this report. We also wish to thank Jill McNamee, who managed the review and publication process. We are indebted to Barbara McGowran for editing our prose to improve its readability and precision, and for her thorough review of the manuscript to save us from ourselves on many occasions. We also thank Jan Cocker for carefully proofreading the final report. Of course, any errors in the study remain our responsibility. Richard A. Victor Petia Petrova Cambridge, MA June 2006 v

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8 Table of Contents Introduction 3 Alabama 5 Alaska 8 Arkansas 11 California 14 Colorado 17 Connecticut 20 Delaware 23 Florida 25 Hawaii 28 Idaho 31 Illinois 34 Indiana 36 Iowa 39 Kansas 41 Kentucky 44 Maine 47 Maryland 50 Massachusetts 52 Michigan 55 Minnesota 58 vii

9 viii table of contents Mississippi 61 Missouri 64 Montana 66 Nebraska 69 Nevada 71 New Hampshire 74 New Jersey 76 New Mexico 78 New York 81 North Carolina 84 North Dakota 86 Ohio 89 Oklahoma 93 Oregon 96 Pennsylvania 99 Rhode Island 102 South Carolina 105 South Dakota 108 Tennessee 110 Texas 113 Utah 116 Vermont 118 Virginia 121 Washington 123

10 table of contents ix Wisconsin 127 Wyoming 130 Glossary 133

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12 State Policies Affecting the Cost and Use of Pharmaceuticals in Workers Compensation: A National Inventory

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14 Introduction This study focuses on the state laws and regulations that affect the costs and use of pharmaceuticals in workers compensation. It is the companion volume to the broader analysis of these issues titled The Cost and Use of Pharmaceuticals in Workers Compensation: A Guide for Policymakers. Chapter 3 of that study summarizes the state policies in effect as of November 15, This volume provides the detailed information state by state that underlies the analysis in that chapter. Scope of This Study This study examines the laws and regulations that are unique to workers compensation, focusing on those involving Pharmaceuticals are also regulated by federal and state governments in a variety of contexts, ranging from premarket approval of new drugs by the Food and Drug Administration (FDA), to postmarket surveillance by the FDA and the liability system, to regulations about directto-consumer advertising, to rules that regulate the prescribing and dispensing of controlled substances (e.g., narcotics), to reimbursement rules for insurance programs where federal or state governments are payors (e.g., Medicaid or the Veterans Health Administration). Analysis of these public policy interventions is outside the scope of this study, as are policies related to over-thecounter drugs and injectables. data and methods reimbursement rules (e.g., fee schedules); stimulating price competition (e.g., rules about pharmacy networks); generic substitution; control of the choice of pharmacy; and utilization management (e.g., authorization for payors to conduct various forms of drug utilization review and specific limitations on the types and amounts of drugs that may be dispensed). The information presented here comes from surveys of workers compensation agency experts in U.S. jurisdictions. Based on the information received, we created state profiles and returned them to the appropriate state experts for review. After receiving additional comments, we revised the state profiles to include in this report. We received completed surveys and review comments from 46 states. The information is current as of November 15,

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16 Alabama Regulation of Pharmaceutical Prices in general Maximum reimbursement rates for pharmaceuticals dispensed at retail pharmacies and at doctors offices are established by the pharmacy fee schedule. For drugs dispensed for hospital outpatients and inpatients, maximum reimbursement rates are established by hospital fee guidelines. Any payor can contract with health care providers for the provision of medical services to injured workers in accordance with the requirements of the Alabama Code, 1975, Section Contracts for medical services at mutually agreed rates. pharmaceuticals dispensed at retail pharmacies Ala. Code The current fee schedule applicable for retail pharmacies became effective on February 15, The maximum fee schedule is expressed by two formulas, based on the Average Wholesale Price (AWP). For brand-name drugs: AWP + (5% of AWP) + $7.01 dispensing fee For generic drugs: AWP + (5% of AWP) + $9.11 dispensing fee pharmaceuticals dispensed at doctors offices The current fee schedule applicable for doctor-dispensed drugs is given by this formula: AWP + (5% of AWP) The doctor must be authorized by the employer as a treating physician, and the treating physician may dispense drugs from his or her own pharmacy at the discretion of the payor. There is no dispensing fee, and the formula is the same for brand-name and generic drugs. pharmaceuticals dispensed for hospital outpatients The hospital fee schedule applies. Pharmaceuticals are part of the per diem inpatient rate. The Alabama Department of Industrial Relations negotiates rates with each hospital, ambulatory surgical center, or licensed outpatient rehabilitation 5

17 6 alabama facility on the basis of the institution s treatment of comparable cases. These rates cover the reimbursement of pharmaceuticals dispensed for injured workers on an inpatient or outpatient basis. If negotiated rates cannot be agreed on, a committee determines the rates. Rates are negotiated annually. The facility contract can be reviewed for payment language. pharmaceuticals dispensed for hospital inpatients The reimbursement rules for pharmaceuticals dispensed for hospital outpatients apply. benchmark for usual and customary Alabama does not use this benchmark for the reimbursement rate of pharmaceuticals. Regulation of Drug Utilization Review generic substitution Ala. Code Generics are permitted explicitly in Alabama. The doctor may prescribe and the pharmacist may dispense generics. Whenever medically appropriate, a pharmaceutically and therapeutically equivalent drug product may be selected by a physician or other authorized practitioner (bioequivalency rating must be A or B). A licensed pharmacist in Alabama is permitted to select a generic if the physician does not expressly prohibit such a substitution. The same rules apply when the doctor prescribes over the phone. use of drug formularies State statutes are silent. According to regulators, use of formularies by payors or pharmacy benefit managers (PBMs) in Alabama is implicitly permitted. use of step therapy State statutes are silent. According to regulators, use of step therapy by payors or PBMs in Alabama is implicitly permitted. use of therapeutic interchange State statutes are silent. According to regulators, use of therapeutic interchange by payors or PBMs in Alabama is implicitly permitted. Choice of Pharmacy Ala. Code The payor chooses the treating provider without restriction. The same rule applies to the pharmacy; that is, under the law, a payor can require that the worker use a specific pharmacy and/or mail-order service.

18 alabama 7 Pharmacy Benefit Managers certification and approval The Alabama Department of Industrial Relations, Workers Compensation Division does not certify or approve PBMs. usage No statutes or regulations require a retail pharmacy to submit a bill to a PBM for payment if a patient in Alabama identifies that PBM. Respondents/Contacts This profile of pharmaceutical regulations in workers compensation in Alabama was reviewed by C. Russell Black of the Alabama Department of Industrial Relations. The authors are grateful to Mr. Black for his assistance. However, any errors or omissions remaining in this profile are the responsibility of the authors. C. Russell Black Administrative Analyst Workers Compensation Division Alabama Department of Industrial Relations 649 Monroe St. Montgomery, AL (334) useful web site

19 Alaska Regulation of Pharmaceutical Prices in general 8 AAC (i) Maximum reimbursement rates for pharmaceuticals are established by the pharmacy fee schedule. pharmaceuticals dispensed at retail pharmacies Maximum reimbursement rates for prescription drugs are the lesser of the following: The usual, customary, and reasonable fee schedule specified by the Alaska Workers Compensation Board in its published bulletin dated December 1, The fee schedule is given by two formulas, based on the Average Wholesale Price (AWP). For brand-name drugs: AWP + (20% of AWP) For generic drugs: AWP + (25% of AWP) The fee or charge for the service when provided to the general public. The fee or charge negotiated by the provider and the employer. pharmaceuticals dispensed at doctors offices The reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply. pharmaceuticals dispensed for hospital outpatients The reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply. 8

20 alaska 9 pharmaceuticals dispensed for hospital inpatients The reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply. benchmark for usual and customary 8 AAC (i) The definition of usual and customary is based on the 90th percentile of the range of charges for similar services reported to the company chosen by the Alaska Workers Compensation Board. Regulation of Drug Utilization Review generic substitution Alaska Stat (n) Generic substitution is mandatory, unless the physician specifies that generic substitution is not allowed. use of drug formularies Alaska Stat (a), (n) State statutes are silent. According to regulators, there is no provision for the use of drug formularies. Because Alaska Statute (a) gives the authority for directing treatment to the treating physician, payors and employers are prohibited from developing formularies. 1 use of step therapy Alaska Stat (a) State statutes are silent. According to regulators, use of step therapy by payors or pharmacy benefit managers (PBMs) is prohibited. The treatment comes at the recommendation of the treating physician and must be reasonable and necessary. Alaska law gives the authority for directing treatment to the treating physician. use of therapeutic interchange Alaska Stat (a) See Use of Step Therapy. Choice of Pharmacy The worker may select any pharmacy. As a result, the employer may not require the worker to use a mail-order service. 1 As of November 7, 2005, a new provision in the law allows the Alaska Department of Labor and Workforce Development to develop a preferred drug list of generic drugs from which physicians must prescribe unless they submit a written justification explaining the medical necessity of prescribing a brand-name drug. As of January 6, 2006, Alaska had not implemented this provision.

21 10 alaska Pharmacy Benefit Managers certification and approval Alaska does not certify or approve pharmacy benefit managers (PBMs). usage No statutes or regulations require a pharmacy to a submit bill to a PBM for payment if a patient in Alaska identifies that PBM. Respondents/Contacts This profile of pharmaceutical regulations in workers compensation in Alaska was reviewed by William Walters of the Alaska Department of Labor and Workforce Development. The authors are grateful to Mr. Walters for his assistance. However, any errors or omissions remaining in this profile are the responsibility of the authors. William Walters Hearing Officer Workers Compensation Division Alaska Department of Labor and Workforce Development 675 Seventh Ave., Station H2 Fairbanks, AK (907) useful web site

22 Arkansas Regulation of Pharmaceutical Prices in general Commission Rule 30 Maximum reimbursement rates for pharmaceuticals dispensed at retail pharmacies, at doctors offices, and for hospital outpatients are established by the pharmacy fee schedule. For drugs dispensed for hospital inpatients, maximum reimbursement rates are established by hospital fee guidelines. We have not determined whether the law permits the payor to contract for fees less than the fee schedule. pharmaceuticals dispensed at retail pharmacies The maximum reimbursement rate for prescription drugs is the lesser of the provider s usual charge, or the following formula, based on the Average Wholesale Price (AWP): AWP + $5.13 dispensing fee The fee schedule was last revised in pharmaceuticals dispensed at doctors offices The reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply; however, the prescribing doctor must be a dispensing physician, as approved by the Arkansas State Medical Board. pharmaceuticals dispensed for hospital outpatients The reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply. pharmaceuticals dispensed for hospital inpatients The hospital per diem rate applies. Drugs are included in the inpatient per diem rate. 11

23 12 arkansas benchmark for usual and customary Usual and customary is based on the individual provider s typical charge. Regulation of Drug Utilization Review generic substitution Commission Rule 30 Generic substitution is mandatory, unless the physician specifies that generic substitution is not allowed. use of drug formularies State statutes are silent. According to regulators, Arkansas implicitly permits the use of formularies. use of step therapy State statutes are silent. According to regulators, Arkansas implicitly permits the use of step therapy. use of therapeutic interchange State statutes are silent. According to regulators, Arkansas implicitly permits the use of therapeutic interchange. Choice of Pharmacy Ark. Code Ann (d)(5)(A) The payor has the right to select the initial treating provider from a managed care entity certified by the commission. However, state statutes are silent on whether a payor can require an injured worker to use a specific pharmacy. According to regulators, payors in Arkansas are implicitly permitted to require the use of a specific pharmacy and/or mail-order service. Pharmacy Benefit Managers certification and approval Arkansas does not certify or approve pharmacy benefit managers (PBMs). usage No statutes or regulations require a pharmacy to submit a bill to a PBM for payment if a patient in Arkansas identifies that PBM.

24 arkansas 13 Respondents/Contacts This profile of pharmaceutical regulations in workers compensation in Arkansas was reviewed by Pat Hannah of the Arkansas Workers Compensation Commission. The authors are grateful to Ms. Hannah for her assistance. However, any errors or omissions remaining in this profile are the responsibility of the authors. Pat Hannah Division Head Medical Cost Containment Division Arkansas Workers Compensation Commission P.O. Box 950 Little Rock, AR (501) useful web sites

25 California Regulation of Pharmaceutical Prices in general Maximum reimbursement rates for pharmaceuticals dispensed at retail pharmacies and at doctors offices are established by the fee schedule of California s Medicaid program, Medi-Cal. The official medical fee schedule in effect on December 31, 2003, applies for drugs not covered by Medi-Cal. For drugs dispensed for hospital outpatients and inpatients, maximum reimbursement rates are established by hospital fee guidelines. California Labor Code and allow for contracted rates. pharmaceuticals dispensed at retail pharmacies CA Code of Reg. tit , CA Labor Code The maximum reasonable fee for pharmacy services rendered after January 1, 2004, is 100 percent of the fee prescribed in the relevant Medi-Cal payment system. Medi-Cal rates are available on the Web site of the Division of Workers Compensation ( The formula for establishing Medi-Cal reimbursement rates is set in the Welfare and Institutions Code For a pharmacy service or drug not covered by a Medi-Cal payment system, the maximum reasonable fee paid cannot exceed the fee specified in the official medical fee schedule in effect on December 31, In such circumstances, reimbursement of pharmaceuticals is the lesser of (1) the provider s usual charge or (2) the fees established by the formulas for brand-name and generic pharmaceuticals as described by two formulas, based on the Average Wholesale Price (AWP). For brand-name drugs: AWP + (10% of AWP) + $4.00 dispensing fee For generic drugs: AWP + (40% of AWP) + $7.50 dispensing fee pharmaceuticals dispensed at doctors offices The reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply. If the National Drug Code (NDC) for a particular pharmaceutical does not appear in the Medi-Cal database, the official medical fee schedule in effect Decem- 1 Medi-Cal s reimbursement would normally be the same for a brand-name or generic multisource (off-patent) drug. Unless special prior authorization is obtained to use a brand-name drug, Medi-Cal pays the lowest of (1) the Federal Upper Limit, (2) the maximum allowable ingredient cost, (3) the Average Wholesale Price less 17 percent, or (4) the usual and customary price. If the doctor specifies dispense as written when prescribing a drug to a workers compensation patient, the higher Medi-Cal fee allowed for a preauthorized drug applies. The Medi-Cal dispensing fee, also used in workers compensation, is $7.25, plus $0.50 for a patient in a nursing home. 14

26 california 15 ber 31, 2003, governs the fees. Repackaged drugs (often dispensed by physicians) are generally not in the Medi-Cal database and are covered by the old fee schedule. pharmaceuticals dispensed for hospital outpatients The Hospital Outpatient/Ambulatory Surgical Facilities Fee Schedule provides the methodology for reimbursement to the covered facility, including pharmaceuticals used in connection with the outpatient facility service. If there are any reimbursable pharmaceuticals dispensed that are not within the facility fee, the fee schedule for retail pharmacies applies. pharmaceuticals dispensed for hospital inpatients The Inpatient Hospital Fee Schedule (based on the diagnosis related group methodology) provides a global fee for all covered inpatient services for an admission. If there are any reimbursable pharmaceuticals dispensed that are not within the facility fee, the reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply. benchmark for usual and customary Usual and customary is based on the individual provider s typical charge. Regulation of Drug Utilization Review generic substitution CA Labor Code Generic substitution is mandatory. Generics should be dispensed unless a generic is unavailable or the prescribing physician specifies in writing that a nongeneric drug must be dispensed. use of drug formularies CA Labor Code , , 4610, Drug formularies, step therapy, and therapeutic interchange are neither specifically permitted nor specifically prohibited by the California workers compensation statutes. Utilization review (California Labor Code 4610) and pharmacy benefit contracts (California Labor Code ) are part of the California workers compensation system. However, the legal parameters of utilization review and use of the three specified cost containment strategies are unknown at this time. use of step therapy See Use of Drug Formularies. use of therapeutic interchange See Use of Drug Formularies.

27 16 california Choice of Pharmacy CA Labor Code In California, the payor can require that the worker use a specific pharmacy and/or mail-order service if there is a contract to provide pharmacy services pursuant to California Labor Code Pharmacy Benefit Managers certification and approval The California Department of Industrial Relations, Division of Workers Compensation, does not certify or approve pharmacy benefit managers (PBMs). usage CA Labor Code No statutes or regulations require a retail pharmacy to submit a bill to a PBM for payment if a patient in California identifies that PBM. Respondents/Contacts This profile of pharmaceutical regulations in workers compensation in California was reviewed by Jacqueline Schauer and Susan McKenzie of the California Department of Industrial Relations, Division of Workers Compensation. The authors are grateful to Ms. Schauer and Ms. McKenzie for their assistance. However, any errors or omissions remaining in this profile are the responsibility of the authors. Jacqueline Schauer Industrial Relations Counsel IV California Department of Industrial Relations Division of Workers Compensation P.O. Box San Francisco, CA (510) Susan McKenzie Physician California Department of Industrial Relations Division of Workers Compensation P.O. Box San Francisco, CA (800) useful web sites

28 Colorado Regulation of Pharmaceutical Prices in general Maximum reimbursement rates for pharmaceuticals dispensed at retail pharmacies, at doctors offices, and for hospital outpatients are established by the pharmacy fee schedule. Pharmaceuticals in Colorado are reimbursed at the lesser of the billed charges or the pharmacy fee schedule amount. For drugs dispensed for hospital inpatients, maximum reimbursement rates are established by hospital fee guidelines. We have not determined whether the law permits the payor to contract for fees less than the fee schedule. pharmaceuticals dispensed at retail pharmacies CCR , Rule XVIII Maximum reimbursement rates for pharmaceuticals are established by the following formula, based on the Average Wholesale Price (AWP): AWP + $6 dispensing fee The fee schedule has been in place since approximately Revisions currently under way will reduce the dispensing fee to $4 effective January 1, pharmaceuticals dispensed at doctors offices The reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply. pharmaceuticals dispensed for hospital outpatients The reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply. pharmaceuticals dispensed for hospital inpatients The inpatient hospital fee schedule includes pharmacy fees during the hospital stay. They are part of the per diem inpatient rate. 17

29 18 colorado benchmark for usual and customary Colorado does not use this benchmark for the reimbursement rate of pharmaceuticals. Regulation of Drug Utilization Review generic substitution Generic substitution is mandatory in Colorado. A bioequivalent generic has to be dispensed if available, unless the physician specifies that generic substitution is not allowed. use of drug formularies State statutes are silent on use of formularies, step therapy, and therapeutic interchange. The authorized treating physician (ATP) determines what drug is reasonable and necessary for the injured worker. use of step therapy See Use of Drug Formularies. use of therapeutic interchange See Use of Drug Formularies. Choice of Pharmacy Colo. Rev. Stat (5)(a) In Colorado, the payor is allowed to designate the ATP, who is to provide reasonable and necessary care. State statutes are silent on the choice of pharmacy. According to regulators, there are no specific provisions regarding the choice of pharmacy and/or the use of mail-order services. Pharmacy Benefit Managers certification and approval Colorado does not certify or approve pharmacy benefit managers (PBMs). usage No statutes or regulations require a retail pharmacy to a submit bill to a PBM for payment if a patient in Colorado identifies a PBM.

30 colorado 19 Respondents/Contacts This profile of pharmaceutical regulations in workers compensation in Colorado was reviewed by Debra J. Northrup of the Colorado Division of Workers Compensation. The authors are grateful to Ms. Northrup for her assistance. However, any errors or omissions remaining in this profile are the responsibility of the authors. Debra J. Northrup Medical Policy Specialist Colorado Division of Workers Compensation th St., Suite 400 Denver, CO (303) useful web sites

31 Connecticut Regulation of Pharmaceutical Prices in general Maximum reimbursement rates for pharmaceuticals dispensed at retail pharmacies, at doctors offices, and for hospital outpatients are established by the pharmacy fee schedule. For drugs dispensed for hospital inpatients, maximum reimbursement rates are established by hospital fee guidelines. We have not determined whether the law permits the payor to contract for fees less than the fee schedule. pharmaceuticals dispensed at retail pharmacies Connecticut Practitioner Fee Schedule Maximum reimbursement rates for prescription drugs are established by the following formulas, based on the Average Wholesale Price (AWP): For brand-name drugs: AWP + $5.00 dispensing fee For generic drugs : AWP + $8.00 dispensing fee The fee schedule was last revised in pharmaceuticals dispensed at doctors offices The reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply. pharmaceuticals dispensed for hospital outpatients The reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply. pharmaceuticals dispensed for hospital inpatients Conn. Gen. Stat (d) The liability of the employer for a hospital service is the amount it actually costs the hospital to render the service, as determined by the commissioner of the Workers Compensation Commission, except in cases of state humane institutions, 20

32 connecticut 21 for the which the liability of the employer is per capita cost as determined by the state controller under the provisions of Connecticut General Statutes, Section 17b-223. benchmark for usual and customary Connecticut does not use this benchmark for the reimbursement rate of pharmaceuticals. Regulation of Drug Utilization Review generic substitution State statutes are silent. According to regulators, Connecticut implicitly permits the substitution of generic drugs for brand-name drugs. use of drug formularies State statutes are silent. According to regulators, the use of formularies by payors or pharmacy benefit managers (PBMs) is implicitly permitted. use of step therapy State statutes are silent. According to regulators, the use of step therapy by payors or PBMs is implicitly permitted. use of therapeutic interchange State statutes are silent. According to regulators, the use of therapeutic interchange by payors or PBMs is implicitly permitted. Choice of Pharmacy Conn. Gen. Stat d(a)(1), (c)(1)(b) The payor is responsible for paying the cost of prescription drugs directly to the provider, at whatever pharmacy the injured worker uses to fill the prescription. However, as part of a managed care plan, the payor may provide to the injured worker a list of pharmacies where direct billing has already been established and where the injured worker must fill prescriptions. State statutes are silent on whether a payor can require the use of mail-order fulfillment of prescriptions. Pharmacy Benefit Managers certification and approval State statutes are silent.

33 22 connecticut usage There are no statutory or regulatory requirements that require retail pharmacies to submit bills to a PBM for payment if a patient in Connecticut identifies a PBM. Respondents/Contacts This profile of pharmaceutical regulations in workers compensation in Connecticut was reviewed by Marilou O. Lang of the Connecticut Workers Compensation Commission. The authors are grateful to Ms. Lang for her assistance. However, any errors or omissions remaining in this profile are the responsibility of the authors. Marilou O. Lang Administrative Hearing Specialist Workers Compensation Commission 21 Oak St. Hartford, CT (860) useful web site

34 Delaware Regulation of Pharmaceutical Prices in general Delaware has not established a pharmacy fee schedule. In addition, the state does not have any regulations for reimbursement of any medical treatment, including pharmaceuticals. We have not determined whether the law permits the payor to contract for fees. pharmaceuticals dispensed at retail pharmacies Delaware has not established a pharmacy fee schedule. pharmaceuticals dispensed at doctors offices Delaware has not established a pharmacy fee schedule. pharmaceuticals dispensed for hospital outpatients Delaware has not established a pharmacy fee schedule. pharmaceuticals dispensed for hospital inpatients Delaware has not established a pharmacy fee schedule. benchmark for usual and customary Delaware does not use this benchmark for the reimbursement rate of pharmaceuticals. Regulation of Drug Utilization Review generic substitution State statutes are silent. According to regulators, generic substitution is implicitly permitted. use of drug formularies State statutes are silent. According to regulators, the use of formularies by payors or pharmacy benefit managers (PBMs) is implicitly permitted. 23

35 24 delaware use of step therapy State statutes are silent. According to regulators, the use of step therapy by payors or PBMs is implicitly permitted. use of therapeutic interchange State statutes are silent. According to regulators, the use of therapeutic interchange by payors or PBMs is implicitly permitted. Choice of Pharmacy Del. Code Ann. Tit The worker chooses the treating provider without restriction. The same rule applies for the choice of pharmacy and/or the use of mail-order services. Pharmacy Benefit Managers certification and approval Delaware does not certify or approve PBMs. usage No statutes or regulations require a retail pharmacy to submit a bill to a PBM for payment if a patient in Delaware identifies a PBM. Respondents/Contacts This profile of pharmaceutical regulations in workers compensation in Delaware was reviewed by John Kirk of the Office of Workers Compensation, Delaware Department of Labor. The authors are grateful to Mr. Kirk for his assistance. However, any errors or omissions remaining in this profile are the responsibility of the authors. John Kirk Administrator Office of Workers Compensation Delaware Department of Labor 4425 N. Market St. Wilmington, DE (302) useful web site

36 Florida Regulation of Pharmaceutical Prices in general According to regulators, Florida has no fee schedule for pharmaceuticals. However, maximum reimbursement rates for pharmaceuticals dispensed at retail pharmacies and at doctors offices are established by a formula that in other states is referred to as a fee schedule. Pharmaceuticals dispensed for hospital outpatients and inpatients are reimbursed at 75 percent of usual and customary charges. Payors may contract with pharmacies for fees. pharmaceuticals dispensed at retail pharmacies Fla. Stat. ch (12)(c) The maximum reimbursement rate for prescription drugs is the lesser of the following: A formula based on the Average Wholesale Price (AWP): AWP + $4.18 dispensing fee An amount contractually agreed between the provider and insurer The reimbursement schedule was last revised October 1, pharmaceuticals dispensed at doctors offices The maximum rate for retail pharmacies applies and is further clarified in Florida Administrative Code rule 69L and the Florida Workers Compensation Health Care Provider Reimbursement Manual, second edition. pharmaceuticals dispensed for hospital outpatients Fla. Stat. ch (12)(c) All compensable charges for hospital outpatient care shall be reimbursed at 75 percent of usual and customary charges. pharmaceuticals dispensed for hospital inpatients Fla. Admin. Code 69L-7.501, Fla. Stat. ch (12) Florida Workers Compensation Reimbursement Manual for Hospitals contains reimbursement policies and per diem rates for hospital services. Pharmaceuticals are included in per diem hospital rates or paid at 75 percent of billed charges when total charges exceed the $50,000 stop-loss pursuant to Florida Statutes chapter (12)(c). 25

37 26 florida benchmark for usual and customary Florida does not use this benchmark for the reimbursement rate of pharmaceuticals dispensed at retail pharmacies. Usual and customary is used for reimbursement of drugs dispensed for hospital outpatients and inpatients and is based on the individual provider s charge, which is based on the facility s charge master. Regulation of Drug utilization Review generic substitution Generic substitution is mandatory, unless the physician specifies that generic substitution is not allowed. use of drug formularies Florida workers compensation law does not specifically address the use of formularies. use of step therapy Florida workers compensation law does not specifically address the issue of step therapy. use of therapeutic interchange Florida workers compensation law does not specifically address the issue of therapeutic interchange. Choice of Pharmacy Fla. Stat (3)(j) Although the payor directs medical care in Florida, under the state s workers compensation law, the worker can choose any pharmacy and/or mail-order service. Pharmacy Benefit Managers certification and approval Florida workers compensation law does not specifically address pharmacy benefit managers (PBMs). usage Florida workers compensation law does not specifically address PBMs.

38 florida 27 Respondents/Contacts This profile of pharmaceutical regulations in workers compensation in Florida was reviewed by Robert Reilly and Duncan Hoehn of the Florida Division of Workers Compensation. The authors are grateful to Mr. Reilly and Mr. Hoehn for their assistance. However, any errors or omissions remaining in this profile are the responsibility of the authors. Robert Reilly Sr. Management Analyst Florida Division of Workers Compensation 200 E. Gaines St. Tallahassee, FL (850) Duncan Hoehn Government Analyst II Florida Department of Financial Services Division of Workers Compensation 200 E. Gaines St. Tallahassee, FL (850) The survey was completed with assistance from staff at the Agency for Health Care Administration. useful web sites

39 Hawaii Regulation of Pharmaceutical Prices in general Maximum reimbursement rates for pharmaceuticals are established by the pharmacy fee schedule. We have not determined whether the law permits the payor to contract for fees less than the fee schedule. pharmaceuticals dispensed at retail pharmacies Haw. Admin. R The maximum reimbursement rate for prescription drugs is determined by the following formula, based on the Average Wholesale Price (AWP): AWP + (40% of AWP) The fee schedule took effect on January 1, pharmaceuticals dispensed at doctors offices The reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply. pharmaceuticals dispensed for hospital outpatients The reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply. pharmaceuticals dispensed for hospital inpatients The reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply. benchmark for usual and customary Hawaii does not use this benchmark for the reimbursement rate of pharmaceuticals. 28

40 hawaii 29 Regulation of Drug Utilization Review generic substitution Haw. Admin. R Generic substitution is mandatory, unless the physician specifies that generic substitution is not allowed. use of drug formularies State statutes are silent. According to regulators, the use of formularies by payors or pharmacy benefit managers (PBMs) is implicitly permitted. use of step therapy State statutes are silent. According to regulators, the use of step therapy by payors or PBMs is implicitly permitted. use of therapeutic interchange State statutes are silent. According to regulators, the use of therapeutic interchange by payors or PBMs is implicitly permitted. Choice of Pharmacy Workers can choose the pharmacies where they fill their prescriptions or use mail-order services without restriction. Pharmacy Benefit Managers certification and approval Hawaii does not certify or approve PBMs. usage No statutes or regulations require a retail pharmacy to submit a bill to a PBM for payment if a patient in Hawaii identifies a PBM. Respondents/Contacts This profile of pharmaceutical regulations in workers compensation in Hawaii was reviewed by Clyde Imada of the Disability Compensation Division of the Hawaii Department of Labor and Industrial Relations. The authors are grateful to Mr. Imada for his assistance. However, any errors or omissions remaining in this profile are the responsibility of the authors.

41 30 hawaii Clyde Imada Workers Compensation Program Chief Disability Compensation Division Hawaii Department of Labor and Industrial Relations 830 Punchbowl St., Room 209 Honolulu, Hawaii (808) useful web site

42 Idaho Regulation of Pharmaceutical Prices in general IDAPA Idaho has not established a pharmacy fee schedule. Maximum reimbursement rates are established at the usual and customary charge for the community. We have not determined whether the law permits the payor to contract for fees. pharmaceuticals dispensed at retail pharmacies Idaho has not established a pharmacy fee schedule. pharmaceuticals dispensed at doctors offices Idaho has not established a pharmacy fee schedule. pharmaceuticals dispensed for hospital outpatients Idaho has not established a pharmacy fee schedule. pharmaceuticals dispensed for hospital inpatients Idaho has not established a pharmacy fee schedule. benchmark for usual and customary Idaho Admin. Code r The usual charge is the most frequent charge made by an individual provider for a given service to nonindustrially injured patients. A customary charge is one with an upper limit not higher than the 90th percentile, as determined by the Idaho Industrial Commission, of usual charges made by Idaho providers for a given service. 31

43 32 idaho Regulation of Drug Utilization Review generic substitution State statutes are silent. According to regulators, generic substitution is implicitly permitted. use of drug formularies State statutes are silent. According to regulators, the use of formularies by payors or pharmacy benefit managers (PBMs) is implicitly permitted. use of step therapy State statutes are silent. According to regulators, the use of step therapy by payors or PBMs is implicitly permitted. use of therapeutic interchange State statutes are silent. According to regulators, the use of therapeutic interchange by payors or PBMs is implicitly permitted. Choice of Pharmacy Idaho Code sec The payor can designate a particular provider or provider network for its injured workers. The payor must make that requirement known to the workers before they report to a physician in regard to a work-related injury. The same rules apply to the choice of pharmacy and/or the use of mail-order services. Pharmacy Benefit Managers certification and approval Idaho does not certify or approve PBMs. usage No statutes or regulations require a retail pharmacy to submit a bill to a PBM for payment if a patient in Idaho identifies a PBM.

44 idaho 33 Respondents/Contacts This profile of pharmaceutical regulations in workers compensation in Idaho was reviewed by Richard E. Monson of the Idaho Industrial Commission. The authors are grateful to Mr. Monson for his assistance. However, any errors or omissions remaining in this profile are the responsibility of the authors. Richard E. Monson Medical Fee Disputes Idaho Industrial Commission P.O. Box Boise, ID (208) useful web site

45 Illinois Regulation of Pharmaceutical Prices in general Illinois has not established a pharmacy fee schedule. Maximum reimbursement rates for pharmaceuticals are established by the usual and customary charge for the community. We have not determined whether the law permits the payor to contract for lower fees. pharmaceuticals dispensed at retail pharmacies Illinois has not established a pharmacy fee schedule. pharmaceuticals dispensed at doctors offices Illinois has not established a pharmacy fee schedule. pharmaceuticals dispensed for hospital outpatients Illinois has not established a pharmacy fee schedule. pharmaceuticals dispensed for hospital inpatients Illinois has not established a pharmacy fee schedule. benchmark for usual and customary Reasonable is determined case by case; customary charges usually are determined on the basis of geographic area. Regulation of Drug Utilization Review generic substitution State statutes are silent. According to regulators, generic substitution is implicitly permitted. 34

46 illinois 35 use of drug formularies State statutes are silent. According to regulators, the use of formularies by payors or pharmacy benefit managers (PBMs) is implicitly permitted. use of step therapy State statutes are silent. According to regulators, the use of step therapy by payors or PBMs is implicitly permitted. use of therapeutic interchange State statutes are silent. According to regulators, the use of therapeutic interchange by payors or PBMs is implicitly permitted. Choice of Pharmacy 50 ILCS 305/8(a) The worker chooses the treating provider. The same rule applies to the choice of pharmacy and/or the use of mail-order services. Pharmacy Benefit Managers certification and approval Illinois does not certify or approve PBMs. usage No statutes or regulations require a retail pharmacy to submit a bill to a PBM for payment if a patient in Illinois identifies a PBM. Respondents/Contacts This profile of pharmaceutical regulations in workers compensation in Illinois was reviewed by Susan Piha of the Illinois Workers Compensation Commission. The authors are grateful to Ms. Piha for her assistance. However, any errors or omissions remaining in this profile are the responsibility of the authors. Susan Piha Manager, Research and Education Illinois Workers Compensation Commission 100 W. Randolph St., #8 200 Chicago, IL (312) useful web site

47 Indiana Regulation of Pharmaceutical Prices in general Ind. Code (3) Indiana has not established a pharmacy fee schedule. However, the maximum reimbursement rate for pharmaceuticals is set at the 80th percentile of the usual and customary charge for the geographic area (based on zip code). Indiana law does not differentiate between pharmaceuticals and other medical services. We have not determined whether the law permits the payor to contract for lower fees. pharmaceuticals dispensed at retail pharmacies Indiana has not established a pharmacy fee schedule. pharmaceuticals dispensed at doctors offices Indiana has not established a pharmacy fee schedule. pharmaceuticals dispensed for hospital outpatients Indiana has not established a pharmacy fee schedule. pharmaceuticals dispensed for hospital inpatients Indiana has not established a pharmacy fee schedule. benchmark for usual and customary Usual and customary is based on the prevailing charge in the geographic area (based on zip code). 36

48 indiana 37 Regulation of Drug Utilization Review generic substitution State statutes are silent. According to regulators, generic substitution is implicitly permitted. Adequate medical care must be directed by the payor. use of drug formularies State statutes are silent. According to regulators, the use of formularies by payors or pharmacy benefit managers (PBMs) is implicitly permitted. use of step therapy State statutes are silent. According to regulators, the use of step therapy by payors or PBMs is implicitly permitted. use of therapeutic interchange State statutes are silent. According to regulators, the use of therapeutic interchange by payors or PBMs is implicitly permitted. Choice of Pharmacy Ind. Code , (a) The payor chooses the treating provider. The same rule applies to the choice of pharmacy and/or the use of mail-order services. Pharmacy Benefit Managers certification and approval The Indiana Worker s Compensation Board does not certify or approve PBMs. usage No statutes or regulations require a retail pharmacy to submit a bill to a PBM for payment if a patient in Indiana identifies a PBM.

49 38 indiana Respondents/Contacts This profile of pharmaceutical regulations in workers compensation in Indiana was reviewed by Krysten Lester of the Indiana Worker s Compensation Board. The authors are grateful to Ms. Lester for her assistance. However, any errors or omissions remaining in this profile are the responsibility of the authors. Krysten Lester Policy and Procedure Analyst Indiana Worker s Compensation Board 402 W. Washington St., Room W-196 Indianapolis, IN (317) useful web site

50 Iowa Regulation of Pharmaceutical Prices in general Iowa has not established a pharmacy fee schedule and does not set maximum reimbursement rates for pharmaceuticals. Payors are permitted to negotiate fee arrangements. pharmaceuticals dispensed at retail pharmacies Iowa has not established a pharmacy fee schedule. pharmaceuticals dispensed at doctors offices Iowa has not established a pharmacy fee schedule. pharmaceuticals dispensed for hospital outpatients Iowa has not established a pharmacy fee schedule. pharmaceuticals dispensed for hospital inpatients Iowa has not established a pharmacy fee schedule. benchmark for usual and customary Iowa does not use this benchmark for the reimbursement rate of pharmaceuticals. Regulation of Drug Utilization Review generic substitution State statutes are silent. According to regulators, generic substitution is implicitly permitted. 39

51 40 iowa use of drug formularies State statutes are silent. According to regulators, the use of formularies by payors or pharmacy benefit managers (PBMs) is implicitly permitted. use of step therapy State statutes are silent. According to regulators, the use of step therapy by payors or PBMs is implicitly permitted. use of therapeutic interchange State statutes are silent. According to regulators, the use of therapeutic interchange by payors or PBMs is implicitly permitted. Choice of Pharmacy The payor chooses the treating provider. The same rule applies to the choice of pharmacy and/or the use of mail-order services. Pharmacy Benefit Managers certification and approval The Iowa Workers Compensation Board does not certify or approve PBMs. usage No statutes or regulations require a retail pharmacy to submit a bill to a PBM for payment if a patient in Iowa identifies a PBM. Respondents/Contacts This profile of pharmaceutical regulations in workers compensation in Iowa was reviewed by Mike Trier of the Iowa Division of Workers Compensation. The authors are grateful to Mr. Trier for his assistance. However, any errors or omissions remaining in this profile are the responsibility of the authors. Mike Trier Commissioner Division of Workers Compensation 1000 E. Grand Ave. Des Moines, IA (515) useful web site

52 Kansas Regulation of Pharmaceutical Prices in general Maximum reimbursement rates for pharmaceuticals dispensed at retail pharmacies, doctors offices, and hospital outpatient facilities are established by the pharmacy fee schedule. We have not determined whether the law permits the payor to contract for lower fees. Drugs dispensed for hospital inpatients are not regulated. pharmaceuticals dispensed at retail pharmacies The maximum reimbursement rate for prescription drugs is the lesser of the pharmacist s or health care provider s usual and customary charge or the amount established by the following formulas, based on the Average Wholesale Price (AWP): For brand-name drugs: AWP (10% of AWP) + $4.00 dispensing fee For generic drugs: AWP (10% of AWP) + $5.00 dispensing fee The fee schedule was last changed on December 1, A new fee schedule will become effective as of December 1, 2005, but it will not include any change in the reimbursement rate for prescription medications. pharmaceuticals dispensed at doctors offices The reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply. pharmaceuticals dispensed for hospital outpatients The reimbursement rules for pharmaceuticals dispensed at retail pharmacies apply. 41