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Important legislative and regulatory updates

California modifies proposed workers’ comp pharmacy fee schedule rules, opens up second comment period

June 20, 2024 · Public Policy & Regulatory Affairs Team

On June 13, the California Division of Workers’ Compensation (DWC) announced a second round of rulemaking, including a new comment period, which contains modifications to the originally proposed pharmacy fee schedule rule changes. The proposed modifications stem from public comments the DWC received from Optum and other stakeholders within the industry.

As previously noted, the DWC has reached the final phase of integrating the workers’ comp pharmacy reimbursement process into the state’s Medicaid (“Medi-Cal”) pharmacy reimbursement structure. Pursuant to past legislative reforms, California Labor Code section 5307.1 governs maximum reimbursement rates for pharmaceuticals dispensed to injured workers in California and requires those rates to be set at 100% of the fees prescribed in the relevant Medi-Cal payment system. The DWC’s overall goal is to conform its fee schedule rules with the statute requirement and current Medi-Cal reimbursement structure. For more background on the DWC’s original proposal, please refer back to our prior Policy Matters Alert on the subject.

Modifications

DWC’s recommended modifications to the original proposed rule changes include the following measures:

In response to comments from Optum and other stakeholders, the proposed effective date/lead time was increased from 90 days to 180 days, which likely means that compliance will not be required until 2025.
Language was amended to make it clear that the “lowest cost” and “no substitution” drug product amounts are to be included in the DWC posted drug pricing data file and should not be calculated separately by stakeholders.
- The DWC file includes the resulting calculated “lowest of” the various adopted pricing benchmarks. The DWC expects stakeholders (payers, PBMs, pharmacies, etc.) to use that file for reimbursement purposes.
Every week, the DWC will post an updated drug pricing file and NPI file (used to determine which pharmacies receive the higher Medi-Cal dispensing fee), absent extenuating circumstances.
- The modified language states that payers must calculate fees based on each new drug pricing or NPI file no later than on the second calendar day after being posted on the DWC website.
- In light of potential retroactive changes in the weekly update(s) or updates between posting of the file(s) and implementation, the modified language requires the payer to re-adjudicate previously paid claims upon request for second bill review (SBR) by the provider.
In response to several comments received from dispensing physicians, the DWC now proposes to allow physicians to receive a dispensing fee, compounding fee, and sterility fee as applicable. However, the dispensing fee is to be the lower of the two Medi-Cal dispensing fees and not one or the other based on volume as is the case with pharmacies.
- Related to this proposed change, the modified proposed rules also specify that the sterility fee is only included in the reimbursement calculation if the physician’s performance of sterile compounding is allowed by state and federal law and complies with the requirements of the specified sterile compounding regulations adopted by the California Board of Pharmacy.

Client awareness & Optum actions

The Optum Public Policy and Regulatory Affairs (PPRA) team remains fully engaged on this issue. We are reviewing how these additional proposed modifications impact Optum’s ability to provide pharmacy services and move forward with compliance actions. As previously noted, the proposed 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.

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. Based on what has been proposed, Optum is already taking action to stay ahead of this. 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 can contract at different rates than the applicable fee schedule.

As the rulemaking continues to progress, the PPRA team will continue to inform our clients as new information is released. We also remain available to discuss the proposed rules, the latest modifications, 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 DWC. Written comments on these latest modifications are due to the DWC by the close of the new public comment period on June 28, 2024. More information and the full text of the proposed rules as modified 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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