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Unmasking the Silent Epidemic: The True Cost of Physician-Dispensed Topicals in Workers’ Comp

Physician-dispensed topicals are costly and there’s no evidence that they are more effective than what is available through the more traditional distribution network of the retail pharmacy network. Why aren’t more states taking action?
By: | November 6, 2023

Few regulatory problems in workers’ compensation are as costly as physician-dispensed topicals.

These drugs, which doctors often give injured workers to take home after an office visit, are costly and oftentimes have lower-cost alternatives. These costs are burdensome for workers’ compensation payers and can ripple throughout the medical system.

During the pandemic, the practice became slightly less common with the decline of in-person office visits, but now it is back to pre-pandemic levels.

Physicians who dispense topicals may be taking advantage of a lack of regulation to sell drugs they believe are safe — albeit no more effective than retail medications — at a premium. Few states have regulations on physician dispensing, allowing it to grow and add to costs. PBMs are lobbying to change laws on a state-by-state basis, but there’s little they can do in the interim, as the practice falls outside of their review process.

The Problem with Physician-Dispensed Topicals

Alan Rook, Senior Clinical Account Executive, myMatrixx

Physician-dispensed medications are those that a doctor prescribes, then gives to the patient themselves, rather than sending them to a pharmacist. The practice is beneficial in rural areas, where it might be difficult for a patient to get to a pharmacy. However, it has been taken advantage of in states without regulatory restrictions by utilizing this distribution network as revenue stream for doctors’ offices. Additionally, it removes crucial pharmaceutical oversight.

Pharmacists, not providers, are experts in how various drugs interact with one another and they can ensure the medications a patient receives are safe and clinically appropriate.

“Physician dispensing bypasses the expected process of checks and balances, of making sure that you’re not running that risk of excessive lidocaine exposure for somebody with a heart arrhythmia or that you’ve got too many NSAIDs on board and you’re going to expose yourself to GI issues,” said Brian Williams, clinical account executive with myMatrixx. “The safety issue shouldn’t be neglected.”

The frustration with PBMs and employers is that the topicals being dispensed are either hyperinflated prescription-strength medications, such as diclofenac and lidocaine products, or over-the-counter (OTC) medications with strengths and combinations of ingredients only available and distributed through physicians’ offices at much higher prices than their counterparts available in the retail setting.

“This is a business model for revenue for some doctors’ offices,” said Alan Rook, senior clinical account executive, myMatrixx. “They either inflate the average wholesale price through physician dispensing on something that is available at retail, or they provide a product that is only available through a physician’s office.”

Some of the drugs are offered exclusively via physician dispensing, and there’s very little evidence to support their use over products that can be purchased for substantially less money.

“Patients are putting something on their skin that may or may not have any benefit,” Rook said. “It is equal to the benefit of Bengay or Voltaren gel. But the cost is potentially thousands of dollars more.”

State-by-State Legislation

Brian Williams, Clinical Account Executive, myMatrixx

Though physician dispensing of topicals is obviously problematic, there are no blanket federal regulations concerning the practice. Each state has its own guidelines, and some have no regulation at all.

“Unfortunately, workers’ comp is run by 50 different states and they all have a different take on it,” Rook said.

There are about 10 states that regulate physician dispensing, Rook said. They are Arizona, Kansas, Massachusetts, Minnesota, New Jersey, New Mexico, Oregon, Rhode Island, Utah and West Virginia.

Another 13 states either have what Rook called “monopolistic or state-mandated” formularies — which list the drugs that are covered under workers’ compensation benefits — or require external review for anything not on the formulary. Those states include Arkansas, California, Indiana, Kentucky, Montana, New York, North Dakota, Ohio, Oklahoma, Tennessee, Texas, Washington and Wyoming.

“Massachusetts, New Jersey, New York, California and Texas are some of the states that are really addressing this and being successful with it,” Rook said.

Some states, like Texas, have both physician dispensing regulations and a workers’ compensation-specific mandated formulary in place. The state’s physician dispensing law restricts the supply limit only to meet patients’ immediate needs unless they are in a rural location.

These regulations are important because the costs of physician dispensing extend beyond payers. Taxpayers, too, can be affected by these costs since many states have public entities, like schools, whose workers’ compensation programs might have to pay for these overpriced medications.

“These costs are impacting the constituents of a state because their taxes are paying for the public entities. This is an unseen cost that you have because of the way these folks do business in your state,” Rook said.

Tackling the Physician Dispensing Problem

By design, physician dispensing of topical medications falls outside of a PBM’s purview. PBMs learn of physician-dispensed medications when they receive a bill, so they can’t make recommendations about the appropriateness of the medication or suggest lower-cost alternatives. Instead, PBMs have to try to intervene retroactively when they believe a medication is unsafe, inappropriate or too costly.

“If the prescriber reaches out to our client for pre-authorization, we can assist them with providing the prescriber with therapeutic alternatives that are less costly,” Rook said. “If they don’t do that, perhaps we can try to deny it and then challenge it at the state level if the denial is petitioned, but we have no idea how certain states, when they’re looking at this, are going to rule.”

myMatrixx often challenges physician-dispensed topicals in order to address overutilization of these medications. It works to educate its clients about physician-dispensed topicals and their effectiveness, and it provides lists of alternative medications that are appropriate and cost-effective. In states lacking physician dispensing legislation, this retrospective oversight is particularly burdensome: “They’re having to fight every single transaction,” Rook said.

As a long-term solution, myMatrixx is lobbying lawmakers in states without physician dispensing regulation to get them to adopt laws that help control the practice. In states that do not have any physician dispensing regulations or state-mandated formularies, payers paid five times as much for topicals in 2022, myMatrixx found in its internal research.

“This is a policy issue as much as it is a clinical issue,” Rook said.

To learn more, visit https://www.mymatrixx.com/.



This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with myMatrixx. The editorial staff of Risk & Insurance had no role in its preparation.

As a PBM focused on workers’ compensation, myMatrixx is dedicated to highly proactive customer support and a full suite of data-driven pharmacy, clinical and regulatory solutions to mitigate risk and safely guide injured workers on their path to recovery.

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