Pharmacy Benefits

Ruling Ties Employers’ Hands on Pharmacy

A Kentucky Supreme Court ruling confirms and codifies employee choice in matters of pharmacy.
By: | September 7, 2017 • 3 min read

Injured workers wishing to choose their own pharmacy can now do so with impunity in Kentucky, thanks to an August 2017 ruling from the state’s supreme court.

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Although workers in the state had been choosing where to fill prescriptions for more than two decades, the court ruling codified the practice and gave workers the chance to bypass insurers’ preferences when obtaining a refill.

In March 2010, KESA, The Kentucky Workers’ Compensation Fund, initiated fee disputes in five workers’ comp claims. In all five cases, the injured workers reported difficulty in getting their medications on time, so they turned to Injured Workers Pharmacy, a mail-order business that sells medications on a lien basis.

IWP takes orders from an injured workers’ treating physician rather than from KESA’s pharmacy benefits manager. The business then bills the insurer for payment. A key point of dispute: While KESA’s PBM negotiates price adjustments with pharmacies, IWP refuses price negotiation, arguing its drugs are based on commercially published average wholesale prices that are within Kentucky’s fee schedule.

Ruling Favors Workers

Although the workers in question reported difficulty in getting their medications on time, KESA argued that was no excuse to turn to IWP as an alternative. In the organization’s eyes, these workers sidestepped official channels and were receiving benefits they weren’t authorized for.

KESA informed the employees of its decision to no longer pay for prescriptions filled through IWP, initiating the medical fee disputes.

In 2013, the claimants and KESA made their way to court.

“Since medicines are ‘medical services,’ and a pharmacist provides that medical service, a pharmacist is a medical provider.” — Justice Michelle M. Keller, writing for the Kentucky Supreme Court

Kentucky law permits workers to choose their own “medical provider,” but the question remained whether pharmacies qualified as providers. KESA cited a 2009 opinion written by the attorney general at the time, which stated that pharmacies are not medical providers.

The court reviewed the opinion but concluded that the attorney general’s opinion ignored an earlier Workers’ Compensation Board order from 1996. The order explicitly stated that pharmacies were medical providers.

KESA was ordered to pay IWP the average wholesale prices for the injured employees’ prescriptions, according to court record. On appeal, the Workers’ Compensation Board affirmed the ruling.

The Power of a Single Word

The Kentucky Supreme Court had an interesting decision to make: What did the term “medical provider” encompass?

The court found no concrete definition of the term in the statute it came from, so it turned to the Kentucky definition of “medical services,” which was defined as “medical, surgical, dental, hospital, nursing and medical rehabilitation services, medicines, and fittings for artificial and prosthetic devices.”

“As did the Court of Appeals, we hold that the plain meaning of these two statutes is that a medical provider is one who provides medical services,” the high court wrote. “Since medicines are ‘medical services,’ and a pharmacist provides that medical service, a pharmacist is a medical provider.”

A similar case appeared in Louisiana a month prior to the Kentucky ruling. Burgess v. Sewerage & Water Board of New Orleans found claimant Darvel Burgess filing a disputed claim for compensation after his employer refused to pay for his prescription medications issued through IWP. A Louisiana statute read that workers have the option to choose their treating physician. In Kentucky, the same statute uses the word provider.

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The Louisiana court’s decision hinged upon that one-word difference: Injured Louisiana workers have a right to pick a “physician,” not a “provider.” The high court reasoned that “physician” is a “very specific term,” one that cannot be interpreted to also mean “pharmacy provider.”

“While the injured employee is entitled to choose his treating physician under [Louisiana law], we hold the law does not provide the employee a right to choose a specific pharmaceutical provider,” the court ruled.

Autumn Heisler is a staff writer at Risk & Insurance. She can be reached at [email protected]

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