[Vision2020] Insurers Pay Big Markups as Doctors Dispense Drugs

[Art Deco]

  [image: The New York Times] <http://www.nytimes.com/>

<http://www.nytimes.com/adx/bin/adx_click.html?type=goto&opzn&page=www.nytimes.com/printer-friendly&pos=Position1&sn2=336c557e/4f3dd5d2&sn1=82ba4650/a6268759&camp=FSL2012_ArticleTools_120x60_1787509c_nyt5&ad=Sessions_120x60_Jun29_noText&goto=http%3A%2F%2Fwww%2Efoxsearchlight%2Ecom%2Fthesessions>

------------------------------
July 11, 2012
Insurers Pay Big Markups as Doctors Dispense Drugs By BARRY
MEIER<http://topics.nytimes.com/top/reference/timestopics/people/m/barry_meier/index.html>and
KATIE
THOMAS<http://topics.nytimes.com/top/reference/timestopics/people/t/katie_thomas/index.html>

When a pharmacy sells the heartburn drug Zantac, each pill costs about 35
cents. But doctors dispensing it to patients in their offices have charged
nearly 10 times that price, or $3.25 a pill.

The same goes for a popular muscle relaxant known as Soma, insurers say.
>From a pharmacy, the per-pill price is 60 cents. Sold by a doctor, it can
cost more than five times that, or $3.33.

At a time of soaring health care bills, experts say that doctors, middlemen
and drug distributors are adding hundreds of millions of dollars annually
to the costs borne by taxpayers, insurance companies and employers through
the practice of physician dispensing.

Most common among physicians who treat injured workers, it is a twist on a
typical doctor’s visit. Instead of sending patients to drugstores to get
prescriptions filled, doctors dispense the drugs in their offices to
patients, with the bills going to insurers. Doctors can make tens of
thousands of dollars a year operating their own in-office pharmacies. The
practice has become so profitable that private
equity<http://topics.nytimes.com/top/reference/timestopics/subjects/p/private_equity/index.html?inline=nyt-classifier>firms
are buying stakes in the businesses, and political lobbying over the
issue is fierce.

Doctor dispensing can be convenient for patients. But rules in many states
governing workers’ compensation insurance contain loopholes that allow
doctors to sell the drugs at huge markups. Profits from the sales are
shared by doctors, middlemen who help physicians start in-office pharmacies
and drug distributors who repackage medications for office sale.

Alarmed by the costs, some states, including California and Oklahoma, have
clamped down on the practice. But legislative and regulatory battles over
it are playing out in other states like Florida, Hawaii and Maryland.

In Florida, a company called Automated HealthCare
Solutions<http://www.ahcs.com/site/index.aspx>,
a leader in physician dispensing, has defeated repeated efforts to change
what doctors can charge. The company, which is partly owned by Abry
Partners<http://www.abry.com/home/news/10-05-24/ABRY_Invests_in_Automated_HealthCare_Solutions_Inc.aspx>,
a private equity firm, has given more than $3.3 million in political
contributions either directly or through entities its principals control,
public records show.

Insurers and business groups said they were amazed by the little-known
company’s spending spree. To plead its case to Florida lawmakers, Automated
HealthCare hired one of the state’s top lobbyists, Brian Ballard, who is
also a major national fund-raiser for the Mitt Romney campaign.

“I consider the fees that these people are charging to be immoral,” said
Alan Hays, a Republican state senator in Florida who introduced a bill to
bar physicians from dispensing pills that was defeated. “They’re legal
under the current law, but they’re immoral.”

Physician prescribing works like this: Middlemen like Automated HealthCare
help doctors set up office pharmacies by providing them with billing
software and connecting them with suppliers who repackage medications for
office sale. Doctors sell the drugs but they do not collect payments from
insurers. In the case of Automated HealthCare, the company pays the doctor
70 percent of what the doctor charges, then seeks to collect the full
amount from insurers.

The number of doctors nationwide who dispense drugs in their office is not
known and the practice is prevalent only in states where workers’
compensation rules allow for large markups.

Dr. Paul Zimmerman, a founder of Automated HealthCare, said that insurers
and other opponents of doctor dispensing were distorting its costs by
emphasizing the prices of a few drugs, rather than the typical price spread
between physician- and pharmacy-dispensed drugs.

Both Dr. Zimmerman and physicians who sell drugs also said the workers’
compensation system was so bureaucratic and complex that an injured
employee could wait days before getting a needed medication through a
pharmacy.

“We did not institute this because of the money,” Dr. Marc Loev, a managing
partner of the Spine Center, a chain of clinics in Maryland, testified last
year at a public hearing in Baltimore. “We instituted it because we were
having significant difficulty providing the care for workers’ compensation
patients.”

The loophole that raises the price of physician-dispensed drugs often
involves a benchmark called “average wholesale price.” The cost of a
medication dispensed through a workers’ compensation plan is pegged in some
states to that benchmark, which is supposed to represent a drug’s typical
wholesale cost.

But doctor-dispensed drugs can undergo an “average wholesale price”
makeover. It happens when firms that supply doctors with medications buy
them in bulk from wholesalers and repackage them for office sale. These
“repackagers” can set a new “average wholesale price,” one that is often
many times higher than the original.

For example, in 2010, a physician associated with the Spine Center, Dr.
Loev’s practice in Maryland, gave a patient a prescription for 360 patches
containing a pain-numbing drug, lidocaine. The worker’s insurer was charged
$7,304, according to a copy of that bill provided to The New York Times by
a lawyer, Michael S. Levin, who represents insurance companies.

A similar number of patches dispensed by a doctor in California, which
changed its regulations in 2007, is about $4,068, according to the
California Workers’ Compensation Institute, a research group.

Warren G. Moseley, the president of a company in Tulsa, Okla., Physicians
Total Care <http://www.physicianstotalcare.com/index.php>, that repackages
drugs for office sale by doctors, said it charged physicians $2,863 for 360
patches.

Dr. Loev, who uses Automated HealthCare’s services, declined to be
interviewed and did not respond to specific written questions from The
Times.

Dr. Charles Thorne, a principal at Multi-Specialty HealthCare, another
Maryland-based chain of clinics that dispenses drugs, also declined to be
interviewed.

Dr. Zimmerman, the co-founder of Automated HealthCare, said that drug
prices are set by companies that repackage medications for office sales.

He added that Automated HealthCare referred doctors to about a dozen
repackagers. But the company has a relationship with one repackaging
company called Quality Care
Products<http://www.qcprx.com/qcprx/pdf/QCPStartUpPacket.pdf>,
based in the Midwest. The two firms have exhibited their services together
and jointly sponsor a charity golf tournament.

The president of Quality Care, Gene Gunderson, declined to be interviewed
and the company did not respond to written questions.

Data collected by Florida insurers who handle workers’ compensation claims
shows that Quality Care supplies about 40 percent of the drugs sold by
doctors in the state, a market share three times as high as that of its
closest competitor.

Robert M. Mernick, the president of Bryant Ranch Prepack, a company in
North Hollywood, Calif., that repackages medications for office sale, said
he found it extraordinary that lawmakers in other states like Florida and
Maryland were allowing such drug markups to continue.

“I see it as corruption,” he said. “I think it is horrible.”

In 2010, Abry Partners, a private equity firm in Boston, bought a stake in
Automated HealthCare for $85 million. Officials of Abry also declined to be
interviewed for this article.

That same year, Florida lawmakers tried to clamp down on how much doctors
could charge for drugs. Automated HealthCare responded with a major
lobbying and spending campaign, focusing its efforts on state leaders like
the president of the Florida senate, Mike Haridopolos.

When the bill was reintroduced this year, Mr. Haridopolos declined to allow
a vote. The state’s insurance commissioner had backed the move, saying it
would annually save firms and taxpayers $62 million, a figure disputed by
Automated HealthCare.

Mr. Haridopolos said he didn’t believe the bill had a chance of winning.
“It seemed like a big political food fight,” he said.

Mr. Hays, the legislator who introduced the measure, said he found that
hard to believe. “The strategy of the people that were opposed to this bill
was to put the right amount of dollars in the right hands and get the bill
blocked,” he said. “And they were successful in doing that.”


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/vision2020/attachments/20120712/25daf3a0/attachment.html>