Study: Reforms Targeting Physician-Dispensed Drugs Have Mixed Results

A new study has found that state reforms to control the costs of prescription drugs by targeting reimbursements for physicians dispensing them are having some effect but that physician-dispensing still accounts for a large share of prescription drug costs in some states.

The Workers’ Compensation Research Institute (WCRI) study of data from 2011 to 2014 found physicians dispensed fewer prescriptions after states enacted price-focused physician dispensing reforms. But as of 2014, physician dispensing was still common and represented a large share of prescription costs in several states including California, Florida, Illinois, Maryland, and Pennsylvania.

The study, A Multistate Perspective on Physician Dispensing, 2011-2014, compares the experience in post-reform states with states where there were no reforms or where only pre-reform experience was observed.

“With any reform, stakeholders want to know if the desired outcome was achieved,” said John Ruser, WCRI’s president and CEO. “This study answers the most important questions policymakers and other system stakeholders have with regard to these state reforms.”

According to the study, the reforms reduced prices for existing drug products, which was evident in all post-reform states. However, physician prices increased for several drugs commonly used to treat injured workers in several post-reform states including California, Florida and Illinois. The price increases were a result of frequent physician dispensing of higher-priced new drug products. When dispensing these new drug products, some physician-dispensers were able to bypass the reimbursement rules, which target physician-dispensed repackaged drugs, and were paid much higher prices than they were paid for existing strengths of the same drug. The results raise questions about the effectiveness and sustainability of the price-focused reforms in these states.

By contrast, physician prices changed little or increased in most non-reform or pre-reform states studied, except for Iowa and Maryland. The cost share of physician-dispensed prescriptions remained the same or increased in many of these non-reform or pre-reform states.

The study found changes in the dispensing pattern of specific drugs that were commonly dispensed by physicians in several states. The shift observed in the distribution of physician-dispensed prescriptions for common drugs suggests that reforms that limit physicians’ ability to dispense certain drugs have had a direct impact.

The data used for this report came from payors that represented 36 – 68 percent of all medical claims across 26 states. The states included in this study are Arkansas, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and Wisconsin. The detailed prescription data cover service years from 2011 through 2014, for all medical claims with 24 months of experience.

WCRI is an independent, not-for-profit research organization based in Cambridge, Mass.