Drug Repackaging

By CMTA Staff

Capitol Update, Aug. 5, 2005 Share this on FacebookTweet thisEmail this to a friend

One of the major problems that has surfaced in the wake of recent workers’ compensation reforms has been drug repackaging by doctors’ offices.  The practice of drug repackaging in order to skirt the fee schedule is a clear abuse of the system.  Currently, payers in the system have no recourse – if the medication is approved, they must provide payment as billed by the doctor.  

The practice is very simple – a company that specializes in this area approaches a doctor and provides them with the medications and the necessary tools for bookkeeping and inventory.  This company has purchased the medications on the wholesale market and then repackaged them for distribution to the doctors’ offices.  The doctors then distribute the medication to their patients and charge the insurer us much as three times the Official Medical Fee Schedule (OMFS) allocation.  What makes the practice worse is that there is often a dispensing fee added to the inflated cost of the medication.  

Senator Jackie Speier (D-Hillsborough) has introduced SB 292 to close the loophole that allows drug repackaging companies to avoid the OMFS.  Because this practice is seen as a clear abuse of the system, SB 292 has considerable support from labor organizations, the employer community and even the Applicant’s Attorneys.  

SB 292 is moving rather smoothly through the legislative process, despite firm resistance from the doctors who are engaging in this practice.  They argue that this is the most efficient way of providing drugs to injured workers.  Even if SB 292 passes, the practice of repackaging would not stop.  The legislation would simply stop the practice of billing outside the OMFS.  

The passage of workers’ compensation reform in 2004 (SB 899, Charles Poochigian, R- Fresno) represented clear progress in policy that was clearly out of control.  In that spirit, SB 292 takes one more step to control costs in the system and close loopholes that allow for abuse.  CMTA is in full support of SB 292.
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