A state court has shelved the Red Book, a compendium of wholesale drug prices that state officials routinely use to settle disputes over drug costs in Pennsylvania’s worker’s comp program.
- In a ruling this week, Commonwealth Court disqualified use of the book after an insurer challenged it, claiming the book’s listed prices were not accurate.
- State officials must find a new guide, according to the ruling.
- Depending on the choice, employers and their insurers could wind up spending less for drugs prescribed to injured workers.
How did this start: With a dispute over how much a workers’ comp insurer should reimburse a pharmacy for generic drugs prescribed to an injured worker.
- The pharmacy sent bills to the insurer totaling $74,011.81 between April 2021 and September 2022, according to court records.
- After reviewing the bill, the insurer adjusted its reimbursement to $1,511.93, based on a gauge called the National Average Drug Acquisition Cost Index, or NADAC index.
- The pharmacy filed an administrative appeal with the state bureau of workers’ compensation fee review, which falls under the Department of Labor & Industry.
- Using the Red Book as its guide, the bureau ordered the insurer to cough up the roughly $72,500 gap between what it was billed and what it believed it should pay.
- The insurer then sought a hearing where it unsuccessfully disputed use of the Red Book, bringing the fight to Commonwealth Court.
Who won: The insurer.
- In a unanimous decision, a seven-judge panel agreed that the Red Book is not an accurate guide to drug prices.
Why not: The book’s prices do not reflect “actual wholesale prices” paid for drugs, as required by state law.
- Prices in the Red Book are more like a manufacturer’s suggested retail price, not the price that people actually pay, according to the ruling.
- However, the court declined to replace the Red Book with the insurer’s preferred alternative, the NADAC index.
- Thus, it is up to state officials to pick a new guide and issue a new decision in the underlying dispute.
- “The department is carefully reviewing the ruling as we evaluate next steps,” a spokesperson for L&I said.
- Under state law, insurers must reimburse 110% of the “actual wholesale price.”
Why is this happening now: Possibly due to the growing cost of prescription drugs, said Jason Hanford, an attorney with Chartwell Law in King of Prussia. He represented the insurer in the Red Book case.
- “In the last five years, there have been a lot of prescriptions in Pennsylvania workers’ comp claims that are extremely costly,” he said, noting that insurers and employers may be taking a closer look now.
- He expected any replacement for the Red Book to lead to a reduction in cost for many drugs.
- Efforts to reach an attorney for the pharmacy company were not successful.
What are the costs: The average prescription in workers’ comp cost $273 in 2022, up from $263 in 2021, according to medical data collections from the Pennsylvania Compensation Rating Bureau, an agency that helps set workers’ comp insurance premiums.
- Claims can involve more than one prescription. In 2022, the average prescription cost per claim was $1,060.76, up from $1,032.56 in 2021, according to the rating bureau.
- According to a report from the bureau for 2018-2020, 29% of workers’ comp claims involved prescriptions.