Reining in physician-dispensed drugs in workers’ comp

Physician-dispensed pharmaceuticals have long occupied a contentious space in workers’ compensation. What may start as a convenience for an injured worker can lead to stark cost differences.

For example, a topical cream dispensed from a physician’s office for $1,200 could cost under $65 at a retail pharmacy, while a repackaged medication billed at over $250 might sell for less than $10 for a nearly identical bottle at the corner drugstore.

But for payers, third-party administrators (TPAs), employers and pharmacy benefit managers (PBMs), the challenge isn’t just financial. It’s also clinical. When medications flow through multiple providers with no centralized view of treatment, patient safety concerns emerge alongside the cost issues.

The physician dispensing debate is often cast as a battle between “cost-focused” payers and caring physicians advocating for injured workers. Kevin Tribout, VP of Public Policy and Regulatory Affairs at Optum, who spent five years on staff in the Illinois legislature before dedicating the last 25 years to workers’ compensation policy, sees the tension differently.

“I think it’s accurate to say that certain stakeholders and organizations are framing the narrative in which an injured worker is seeking access to needed medication, while payers are creating barriers,” Tribout says. “That’s a familiar dynamic in workers’ compensation, and discussions can quickly become framed as labor versus employers rather than focusing on the broader questions of access, safety, and cost.”

But reducing the conversation to a labor-versus-employer dispute obscures a very real clinical concern. In everyday health care, patients often see multiple specialists, such as a cardiologist, an orthopedic surgeon and a primary care doctor, and each may prescribe medications without full visibility into what the others are doing.

“In workers’ compensation pharmacy care, sometimes these medications, whether physician-dispensed topicals, compounds or even traditional prescription medications, create safety concerns when different physicians are unaware of what other doctors are prescribing for the same patient,” Tribout says. “This medication interaction issue extends far beyond opioids.”

Then there’s the cost dimension, which has evolved through several distinct waves. A decade ago, Florida tackled repackaged medications, where physicians dispensed drugs with unique NDCs at dramatic markups.

More recently, the industry has seen the rise of niche dosages, for example, a 7.5 milligram version of a drug that costs around $350 when standard 5 and 10 milligram versions are widely available at a fraction of the price at retail pharmacies.

Today, the frontier is private-label and over-the-counter (OTC) topicals, where Pennsaid Solution (Diclofenac) topical can be billed at over $2,000, while Diclofenac 1% gel (OTC) can cost under $20.

One of the strongest arguments for controlled dispensing is the clinical value of a single, centralized view of an injured worker’s medications.

“When medications come through one source, such as a designated pharmacy that the injured worker consistently uses, you have multiple layers of oversight,” Tribout says. “The pharmacist, the clinician at the PBM and the nurse case manager at the payer all see the complete medication profile.”

“It’s also a factor into why people use a single pharmacy for their personal medications,” Tribout notes. “Continuity of visibility catches dangerous interactions before they happen.”

When an injured worker consistently uses one pharmacy, the care team has a clearer view of the full medication profile and a better chance of identifying risks before they become problems. That oversight is especially important when treatment may involve pain medications, muscle relaxants, topicals or prescriptions from multiple providers.

Workers’ compensation has shown it can act quickly when the data makes the risk clear.

“In my honest belief, workers’ comp was years ahead of the rest of the health care market when it came to the opioid problem,” Tribout says. “The industry recognized the pattern early, understood the implications and moved to bring utilization under better control.”

That same data-driven approach is now needed to address physician dispensing, identifying utilization patterns, flagging cost outliers and comparing physician-dispensed drugs to their generic and therapeutic equivalents.

Approximately 41 states have adopted some form of control mechanism, be that supply limits, reimbursement caps, prior authorization requirements or NDC-based pricing rules, to address repackaged medications, compounds, physician dispensing and other adjacent medication utilization issues. States including South Carolina, Mississippi, Michigan, Colorado and Arizona have taken the lead on meaningful action related to topicals.

But the pattern has become predictable. States close one loophole, and a new one opens. “It’s always that whack-a-mole situation. You control it in one area, but then it pops up somewhere else,” Tribout says.

The industry first tackled high-priced compounds, sometimes billed at $1,500, through legislation and prior authorization requirements. Then came repackaged medications, which states addressed by requiring pricing based on the original manufacturer’s NDC. Now the challenge is private-label topicals and topical compounds.

“What’s needed,” Tribout suggests, “is a more coordinated industry response rather than a series of reactive fixes. Right now, fragmentation is the industry’s biggest obstacle to unified advocacy.”

He argues that the best path forward is for the industry to decide whether it wants to build a broader coalition, perhaps through state insurance associations or a dedicated trade group, and if so, to then identify four or five priorities in the medical and pharmacy space and pursue them consistently across states.

Data will drive those conversations. When Optum worked with Pennsylvania regulators, it shared data from its own book of business, comparing the top five physician-dispensed topical drugs by cost and utilization against generic or therapeutic equivalents. That kind of transparent, side-by-side analysis is what moves policymakers.

“The discussion I’ve heard and been engaged with among policymakers isn’t about stopping physician dispensing,” Tribout says. “What states have done is put a lid on the abuse they were seeing with these high-priced compounds while preserving access for legitimate cases. States do have the ability to control utilization and costs while simultaneously ensuring that when there is a medical necessity, the injured worker can get the care they need.”

The ultimate goal is straightforward: safer care for injured workers, and lower premiums for the employers who fund the system.