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Financial impact of alternative pricing benchmarks for physician-dispensed drugs in the California workers’ compensation system

Wilson, Leslie, Turkistani, Fatema, Tran, Dang M., Huang, Wei and Lin, Tracy Kuo (2019) Financial impact of alternative pricing benchmarks for physician-dispensed drugs in the California workers’ compensation system. Applied Health Economics and Health Policy, 17 (2). pp. 231-242. ISSN 1175-5652

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Identification Number: 10.1007/s40258-018-0442-2

Abstract

Background: Pricing drugs in the California Workers’ Compensation System (CAWCS) has become more difficult as there are increasingly fewer drugs listed in the Medi-Cal primary fee schedule, which is used as the source for CAWCS drug prices. This presents a challenge of providing timely and accurate CAWCS reimbursement. The objectives of this study are (1) to explore any trends in physician-dispensed drug prices; (2) to compare the proportion of drugs with and without a price and to determine the financial implications of repricing CAWCS physician-dispensed drugs with five alternative pricing benchmarks; and (3) to offer recommendations for the pricing benchmark to maximize pricing coverage and to remain budget neutral. Methods: We evaluated physician-dispensed drugs at the transaction level, reimbursed in the CAWCS. Frequency, reimbursement rate, and total and average paid costs were reported. We matched each claim line in the CAWCS to the corresponding unit price of an alternative price benchmark including average wholesale price, wholesale acquisition cost, direct prices, national average drug acquisition cost, and Federal Upper Limit. Results: Average wholesale price provided prices for 99.9% of physician-dispensed drug claims, while Medi-Cal, the current primary physician-dispensed drug benchmark provided prices for a lower percentage (92.7%) of claims. The CAWCS prices were equivalent to 49% of the average wholesale price, 95.5% of Medi-Cal, 126.7% of the wholesale acquisition cost, 266% of the Federal Upper Limit, 64.4% of direct prices, and 197% of national average drug acquisition cost-estimated prices. Conclusions: The CAWCS current Medi-Cal pricing for physician-dispensed drugs is better than all alternatives in terms of price availability, transparency, and budget neutrality, but pricing availability may decrease over time as Medi-Cal moves to managed care. National average drug acquisition cost is the next best alternative, but it requires combinations of pricing benchmarks to maximize its price availability.

Item Type: Article
Additional Information: © 2018 Springer Nature Switzerland AG
Divisions: Social Policy
Subjects: H Social Sciences > HG Finance
R Medicine > RA Public aspects of medicine
Date Deposited: 29 Apr 2019 11:27
Last Modified: 12 Dec 2019 00:40
URI: http://eprints.lse.ac.uk/id/eprint/100530

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