Study shows rapid growth in cost of physician-dispensed prescriptions versus pharmacies

CAMBRIDGE, Mass. — While regulations meant to control the prices of drugs dispensed through physician offices for injured workers can keep costs down without limiting access, employers in many states may end up paying more than twice what they would have if the workers had gone to a pharmacy instead, according to a new study.

The study, conducted by the Cambridge, Mass.-based Workers Compensation Research Institute, examined data for nearly 5.7 million prescriptions paid under workers' compensation for nearly 760,000 claims in 23 states from 2007-2008 to 2010-2011. It focused in particular on California, where regulations adopted in 2007 cut the prices paid to physician offices. Critics of the regulations feared they would result in fewer physician offices dispensing drugs because it would be less profitable, but the study found that wasn't the case.

"There is a great discrepancy between what doctors and pharmacies charge for dispensing the same drug," WCRI executive director Richard Victor said. "One question for policy-makers is whether the large price difference paid when physicians dispense is justified by the benefits of physician dispensing."

Another concern about the California regulations was that they would increase costs because physicians nearly always dispensed generics, while pharmacies dispensed generic and branded drugs. But the WCRI researchers found that for the medications commonly dispensed by physicians, physicians and pharmacies alike almost always dispensed generics. The study cited the example of Abbott's painkiller Vicodin (hydrocodone and acetaminophen), for which physicians in California received 85 cents per pill before the regulations, while pharmacies received 43 cents. After the regulations were adopted, physicians received 52 cents, compared with 48 cents for pharmacies. But despite the decrease in prices, the percentage of physicians dispensing prescriptions went from 55% before the regulations to 53% after.

In many states, a large percentage of drugs for injured workers are dispensed through physician offices rather than pharmacies, which the report said raised costs for employers because the same drug bought through a physician office can cost more than twice what it does at a pharmacy.

In Pennsylvania, the percentage of payments to physicians for dispensing drugs at their offices increased from 15% to 27% in the three-year period studied. Vicodin in that state cost $1.13 per pill at physicians' offices, compared with 35 cents at pharmacies, thus raising costs to employers. In many cases, prices paid for physician-dispensed drugs increased for several drugs, while prices paid to pharmacies changed little or fell; for example, respective prices for Vicodin and ibuprofen increased by 23% and 26% at physician offices while falling 10% and 13% at pharmacies.

Meanwhile, in Florida, 62% of all prescription drug spending for injured workers went to physicians instead of pharmacies. The fastest growth in the frequency and cost of physician-dispensed drugs was in Illinois, which saw prescription drug payments to physicians go from 22% to nearly two-thirds of the total in three years. Vicodin in Illinois cost $1.44 per pill at physicians' offices and 53 cents at the pharmacy.

"We rarely see a medical cost driver that has grown this rapidly," Victor said.