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Important legislative and regulatory updates

California proposes revised workers’ comp pharmacy fee schedule

March 4, 2024 · Public Policy & Regulatory Affairs Team

On February 26, 2024, the California Division of Workers’ Compensation (DWC) proposed significant rule changes in the final phase of integrating its workers’ comp pharmacy reimbursement process into the state’s Medicaid (“Medi-Cal”) pharmacy reimbursement structure. Pursuant to past legislative reforms, the California Labor Code section 5307.1 governs maximum reimbursement rates for pharmaceuticals provided to injured workers in California and requires those rates to be “100% of fees prescribed in the relevant Medi-Cal payment system.”

The existing workers’ comp pharmacy fee schedule adopted a reimbursement rate for simple pharmacy-dispensed prescriptions set at the lesser of the pharmacy’s usual and customary (U&C) charge or the drug ingredient cost plus a dispensing fee. The current workers’ comp dispensing fee is $7.25 (or $8 if the patient is in a skilled nursing facility or in an intermediate care facility). Drug ingredient cost is currently based on the lowest amount of the following:

Average Wholesale Price (AWP) – 17%
Federal Upper Limit (FUL)
Medi-Cal Maximum Allowable Cost (MAIC)

In conjunction with the MTUS Drug Formulary, various statutory and rule-making efforts since 2012 have addressed additional reimbursement rates and billing requirements for physician dispensed medications, repackaged medications, and compounds.

New proposal

The proposed rule would include new drug ingredient reimbursement components and update the reimbursement structure to track with the “most current” Medi-Cal reimbursement rate. This proposed rate for simple pharmacy-dispensed prescriptions would be the lesser of the pharmacy’s U&C charge or the drug ingredient cost, plus a dispensing fee. The updated drug ingredient cost is based on the lowest amount of the following:

National Average Drug Acquisition Cost (NADAC) – If NADAC is unavailable then Wholesale Acquisition Cost (WAC) +0%
FUL
Medi-Cal MAIC

The proposed rule also implements a new dispensing fee requirement based upon the volume of business with the Medi-Cal program at $10.05 for higher-volume pharmacies and $13.20 for smaller-volume pharmacies. Beyond simple prescriptions, the proposed rule contains new reimbursement language for medications when the prescriber indicates DNS/DAW, compounded medications (including sterile/non-sterile compounds and routes of administration), repackaged drugs, and physician dispensed medications – some of which are required by prior statutory changes.

Client awareness & Optum actions

As with all regulatory changes, the Optum Public Policy and Regulatory Affairs (PPRA) team is fully engaged on this issue. We are reviewing how these proposed rules impact Optum’s ability to provide pharmacy services and move forward with compliance actions. The rules call for an extensive modification and re-write of the current reimbursement process for medications dispensed to an injured person receiving workers’ comp pharmacy care in California.

On top of inserting new reimbursement calculations, entities providing pharmacy services will be required to provide full connectivity with both DWC and Medi-Cal in order to receive reimbursement in addition to an indication of size and drug calculations feeds from both agencies. If adopted, these rules will require significant development and implementation and will have significant impact on PBM processes as well as bill review activity and possibly utilization review protocols. Even with the proposed changes to pharmacy reimbursement rates, it is important to note that California remains a state where payers, providers, and pharmacy service entities are permitted to contract at rates that differ from the applicable fee schedule.

As the rulemaking progresses, the PPRA team will continue to provide information to our clients as they are made known. We also remain available to discuss the proposed rules and their impact on how we work with clients to provide quality pharmacy care. We urge interested clients to engage in the rulemaking process and provide feedback to the Division. Presently, the proposed rule is in the initial stages of rulemaking, with any written comments due on by the next scheduled public hearing on April 11. More information and the full text of the rule can be found here.

Additional Optum resources:

For more information on these policy developments and others we have been tracking this year, be sure to visit our Legislative and Regulatory Tracker. Bills or regulations can be filtered by insurance line, topic, status and jurisdiction.

If you have questions on these or any other public policy developments, please contact our team at OptumWC.PolicyMatters@optum.com.

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