California workers’ compensation prescription drug costs may be on the rise again, but not because of an increase in the use of drugs outside of the Medi-Cal fee schedule according to new research by the California Workers’ Compensation Institute. Under the workers’ compensation pharmacy fee schedule adopted in 2004, maximum reasonable fees for medications are calculated based on Medi-Cal rates, which help control pharmacy costs. On the other hand, use of drugs that are not in the Medi-Cal database could drive up prescription drug expenditures, which has become a concern since recent reports indicate that total California workers’ compensation pharmacy costs are again moving up.

The new Institute study, however, shows that since the state closed a regulatory loophole that had allowed significantly higher fees for repackaged drugs dispensed to injured workers from doctors’ offices, use of Medi-Cal scheduled drugs has skyrocketed. The study, based on an analysis of more than 4.5 million California workers’ compensation prescriptions filled between 2005 and 2009, found that Medi-Cal scheduled drugs accounted for more than 93 percent of all prescriptions dispensed to injured workers in California last year, up from 33 percent in 2005, with most of the shift toward Medi-Cal scheduled drugs occurring immediately after the state cracked down on drug repackaging in 2007.

The Institute notes that the dwindling use of drugs that are outside the Medi-Cal database suggests that recent increases in overall prescription drug costs in California workers’ compensation are due to other factors. Among the potential cost drivers: changes in the mix of workers’ compensation medications (with greater reliance on more expensive drugs and the emergence of compound drugs, co-packs and medical foods); increases in the average number of prescriptions per claim or the average number of pills per prescription; increases in Average Wholesale Prices used to calculate reimbursements, and Pharmacy Benefit Manager contract rates or payments that exceed the pharmacy fee schedule allowances.

The Institute has posted a free, downloadable copy of its Research Spotlight Report, "The Percentage of California Workers’ Compensation Prescriptions Falling Outside the Medi-Cal Fee Schedule Database" in the Research section of its website at www.cwci.org.