Pharmacy Cost Control
Dispensing Reform Resistance May Be Strengthening
The effectiveness of reforms targeting physician dispensing may be short-lived. A new study points to an apparent strategy by some medical providers to circumvent laws aimed at keeping their medication dispensing costs in check.
While 18 states have adopted changes to reduce the costs of physician-dispensed drugs, most contain language limiting reimbursement to a price based on the average wholesale price (AWP) of the original manufacturer. The Workers Compensation Research Institute found evidence in two states where some physician dispensers were still able to charge much higher prices for the same medication.
“How can a new and higher AWP be set for physician-dispensed drugs?” the report questioned. “Consider a drug where the most common strengths are 5 milligrams and 10 milligrams. If a new strength, say 7.5 milligrams, comes to market, the original manufacturer of that new strength can assign a new AWP, and this AWP could be much higher than the 5 milligram and 10 milligram AWPs set by their original manufacturers.”
It’s a practice that seems to be prevalent in California and Illinois, according to the report. WCRI looked at physician dispensing patterns pre- and post-reforms in the two states for the drugs hydrocodone-acetaminophen (Vicodin), cyclobenzaprine HCL (Flexeril), and tramadol HCL (Ultram).
“Prior to the reforms in Illinois, there were two common strengths when cyclobenzaprine HCL was prescribed — 5 and 10 milligrams. The average prices paid … ranged from $0.99 to $1.74 per pill,” according to the report. “The 7.5-milligram products were introduced in 2012 and almost all were dispensed by physicians at an average price of $3.79 per pill in post-reform Illinois. The market share of physician dispensed cyclobenzaprine HCL of 7.5 milligrams increased from zero percent in the third quarter of 2012 to 21 percent in the first quarter of 2013.”
In California the increase was even more dramatic. Market share of the physician-dispensed 7.5 milligrams of the drug went from zero percent in the fourth quarter of 2011 to 47 percent in the first quarter of 2013 “when it became the strength of the drug most commonly dispensed by physicians,” the report said. Where prices for the 5 and 10 milligrams drug in California ranged from $0.35 to $0.71 per pill, “the average price paid for the new strength was $2.90 to $3.45 per pill.”
Similar results were found for the other two drugs as well. By the end of 2012, the new strength of tramadol HCL (150 milligrams extended release) became one of the most common physician-dispensed drugs in California with an average price of $5.94 to $7.41 per pill compared with $1.58 for the same drug of other strengths.
While the prevalence of the new strengths of the drugs was less in other reform states, the authors suggest it is an emerging issue that could be challenging to other states with physician-dispensing reforms.
“These reforms were expected to lead to substantial price reductions by capping the prices paid for physician-dispensed repackaged drugs. However, the results from this study suggest a behavioral change after the reform on the supply side of drug products and on the part of some physician dispensers who wrote and dispensed three new-strength products and were paid higher prices,” the report said. “Because these new-strength drug products were almost all dispensed by physicians at much higher prices, we infer that the shift in strength was unlikely to be driven by new evidence about superior medical practices. Rather, it is likely that financial incentives drove some physicians to choose the strength for their patients.”