WCB-31-07-00001-E Pharmacy and Durable Medical Equipment Fee Schedules
8/1/07 N.Y. St. Reg. WCB-31-07-00001-E
NEW YORK STATE REGISTER
VOLUME XXIX, ISSUE 31
August 01, 2007
RULE MAKING ACTIVITIES
WORKERS' COMPENSATION BOARD
EMERGENCY RULE MAKING
I.D No. WCB-31-07-00001-E
Filing No. 705
Filing Date. Jul. 11, 2007
Effective Date. Jul. 11, 2007
Pharmacy and Durable Medical Equipment Fee Schedules
PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:
Action taken:
Addition of new Subchapter M, Parts 440 and 442 to Title 12 NYCRR
Statutory authority:
Workers' Compensation Law, sections 117 and 137
Finding of necessity for emergency rule:
Preservation of general welfare.
Specific reasons underlying the finding of necessity:
Claimants are unduly burdened by having to pay out-of-pocket for prescription medications thus reducing the amount of benefits available to them to pay for cost of living expenses. Adoption of this fee schedule will alleviate this burden to claimants, effectively maximizing the benefits available to them and eliminating the delay associated with requesting reimbursement from the insurance carrier. Adoption of this amendment is necessary to get prescription drugs to claimants faster by allowing pharmacies to directly bill carriers and to eliminate the litigation caused by the differences in cost of prescription drugs and the reimbursement rates paid by carriers. Adoption of this amendment also allows claimants to fill prescriptions by the internet or mail order thus aiding claimants with mobility problems and reducing transportation costs necessary to drive to a pharmacy to fill prescriptions. Accordingly, emergency adoption of this rule is necessary.
Subject:
Pharmacy and durable medical equipment fee schedules.
Purpose:
To adopt pharmacy and durable medical equipment fee schedules.
Substance of emergency rule:
Chapter 6 of the Laws of 2007 added Section 13-o to the Workers' Compensation Law (“WCL”) mandating the Chair to adopt a pharmaceutical fee schedule. WCL Section 13(a) mandates that the Chair shall establish a schedule for charges and fees for medical care and treatment. Part of the treatment listed under Section 13(a) includes medical supplies and devices that are classified as durable medical equipment. The proposed rule adopts a pharmaceutical fee schedule and durable medical equipment fee schedule to comply with the mandates. This rule adds a new Part 440 which sets forth the pharmacy fee schedule and procedures and rules for utilization of the pharmacy fee schedule and a new Part 442 which sets forth the durable medical equipment fee schedule.
Section 440.1 sets forth that the pharmacy fee schedule is applicable to prescription drugs or medicines dispensed on or after July 11, 2007.
Section 440.2 provides the definitions for brand name drugs, controlled substances, generic drugs, and rural areas.
Section 440.3 provides that a carrier or self-insured employer may designate a pharmacy or pharmacy network which an injured worker must use to fill prescriptions for work related injuries. This section sets forth the requirements applicable to pharmacies that are designated as part of a pharmacy network at which an injured worker must fill prescriptions. This section also sets forth the procedures applicable in circumstances where an injured worker is not required to use a designated pharmacy or pharmacy network.
Section 440.4 sets forth the requirements for notification to the injured worker that the carrier or self-insured employer has designated a pharmacy or pharmacy network that the injured worker must use to fill prescriptions. This section provides the information that must be provided in the notice to the injured worker including time frames for notice and method of delivery as well as notifications of changes in a pharmacy network.
Section 440.5 sets forth the fee schedule for prescription drugs. The fee schedule in uncontroverted cases is equivalent to the New York State Medicaid fee schedule for prescription drugs plus a dispensing fee of five dollars for generic drugs and four dollars for brand name drugs, and in controverted cases is ten percent above the New York State Medicaid fee schedule plus a dispensing fee of seven dollars and fifty cents for generic drugs and six dollars for brand-name drugs.
Section 440.6 provides that generic drugs shall be prescribed except as otherwise permitted by law.
Section 440.7 sets forth a transition period for injured workers to transfer prescriptions to a designated pharmacy or pharmacy network. Prescriptions for controlled substances must be transferred when all refills for the prescription are exhausted or after ninety days following notification of a designated pharmacy. Non-controlled substances must be transferred to a designated pharmacy when all refills are exhausted or after 60 days following notification.
Section 440.8 sets forth the procedure for payment of prescription bills or reimbursement. A carrier or self-insured employer is required to pay any undisputed bill or portion of a bill and notify the injured worker by certified mail within 45 days of receipt of the bill of the reasons why the bill or portion of the bill is not being paid, or request documentation to determine the self-insured employer's or carrier's liability for the bill. If objection to a bill or portion of a bill is not received within 45 days, then the self-insured employer or carrier is deemed to have waived any objection to payment of the bill and must pay the bill. This section also provides that a pharmacy shall not charge an injured worker or third party more than the pharmacy fee schedule when the injured worker pays for prescriptions out-of-pocket, and the worker or third party shall be reimbursed at that rate.
Section 440.9 provides that if an injured worker's primary language is other than English, that notices required under this part must be in the injured worker's primary language.
Part 442 sets forth the fee schedule for durable medical equipment.
Section 442.1 sets for that the fee schedule is applicable to durable medical goods and medical and surgical supplies dispensed on or after July 11, 2007.
Section 442.2 sets forth the fee schedule for durable medical equipment as indexed to the New York State Medicaid fee schedule. This section also provides for the rate of reimbursement when Medicaid has not established a fee payable for a specific item.
Appendix A provides the form for notification to be posted in designated pharmacies listing the insurance carriers that are served by the pharmacy.
Appendix B provides the form for notifying injured workers that the claim has been contested and that the carrier is not required to reimburse for medications while the claim is being contested.
Appendix C provides the form for notification of injured workers that the self-insured employer or carrier has designated a pharmacy that must be used to fill prescriptions.
This notice is intended
to serve only as a notice of emergency adoption. This agency intends to adopt this emergency rule as a permanent rule and will publish a notice of proposed rule making in the State Register at some future date. The emergency rule will expire October 8, 2007.
Text of emergency rule and any required statements and analyses may be obtained from:
Cheryl M. Wood, Esq., Workers' Compensation Board, 20 Park St., Rm. 401, Albany, NY 12207, (518) 486-9564, e-mail: officeofgeneralcounsel@wcb.state.ny.us
Regulatory Impact Statement
1. Statutory authority: Workers' Compensation Law (WCL) § 117 authorizes the Chair of the Workers' Compensation Board (Board) to adopt reasonable rules consistent with the provisions of the WCL. Chapter 6 of the Laws of 2007 added Section 13-o to the WCL mandating that the Chair adopt a pharmaceutical fee schedule. Chapter 6 amended WCL Section 13 to add new subdivision (i). Paragraph (5) of said new subdivision requires the adoption of regulations defining the reasonable distance for a claimant to travel to obtain prescriptions. WCL Section 13(a) was amended by Chapter to mandate that the Chair establish a schedule for charges and fees for medical care and treatment. Part of the treatment listed under Section 13(a) includes medical supplies and devices that are classified as durable medical equipment. Finally, Section 80 of Chapter 6 authorizes the Chair, in consultation with the Superintendent of Insurance, to adopt regulations relating to the procedural requirements necessary to implement the provisions of Chapter 6.
2. Legislative objectives: The proposed regulations provide fee schedules to govern the cost of prescription medicines and durable medical equipment in order to control the cost of workers' compensation insurance. Additionally, the proposed regulations provide process and guidance for claimants, employers, insurance carriers, third party administrators and self-insured employers regarding the operation of pharmacy networks and the payment of prescription bills and durable medical equipment bills according to a uniform standard so that delays in reimbursement or payment to claimants or pharmacies are reduced or eliminated.
3. Needs and benefits: Chapter 6 of the Laws of 2007 enacted sweeping reforms of the New York workers' compensation system. Among other things, the legislation requires the Chair to adopt a pharmacy fee schedule and a fee schedule to govern durable medical equipment. In a major shift, the legislation authorizes insurance carriers and self-insured employers to require claimants to obtain prescriptions from a pharmacy that participates in the network the carrier or self-insured employer may contract with. Prior to this legislation, carriers and self-insured employers were prohibited from directing claimants as to where to obtain medicines, unless the carrier or self-insured employer utilized a Preferred Provider Organization (PPO). Even then claimants could opt out of the PPO after thirty days. To ensure claimants do not have to travel long distances to reach a network pharmacy, WCL Section 13(i)(5) requires a pharmacy location to be within a “reasonable distance” of the claimant's home if the option of a mail order pharmacy is not available. The term “reasonable distance” is to be defined in regulations. Finally, new WCL § 13(i)(2) sets forth the time period and process by which bills for pharmaceuticals must be paid.
The purpose of the rule is to comply with the requirements of the legislation. The rule sets forth the fee schedules for prescription medicines and durable medical equipment. Currently, there is no set fee for prescriptions and durable medical equipment. Instead, the pharmacies and other providers of durable medical equipment charge the price they set. The carrier or self-insured employer must then pay the billed cost or object to the portion which is determined to be excessive or greater than the charges that prevail in the claimant's community. In the past a particular pharmacy has charged more than twice what is considered the customary charge. Disputes over the payment for prescription medications to pharmacies must, in many cases, be decided by a Workers' Compensation Law Judge (WCLJ). Using hearings to resolve these disputes is very costly and time consuming. The time a WCLJ spends deciding the correct payment to a pharmacy is time not spent adjudicating claims for benefits. By having a set fee schedule, there is no dispute over the proper payment for a prescription.
The fee schedule also provides savings to carriers, and ultimately to employers by reducing the cost of workers' compensation insurance. These entities will indirectly benefit from the savings afforded by Medicaid's negotiating power with drug manufacturers. Those carriers and self-insured employers paying currently paying average wholesale price will realize savings of approximately 14 percent for brand name medications and 25 percent for generic medications.
Additionally, the rule requires carriers to provide notice to a claimant that a network pharmacy has been designated and the procedures for filling prescriptions at the designated network pharmacy. The rule sets forth the information that must be included in the notice and the time frame within which notification must be given to the claimant and by the proper means to deliver such notice. The rule also facilitates direct billing of the carrier by the network pharmacy. This benefits the carrier as well as the claimant by reducing the delays inherent in submitting bills to the carrier by the claimant. Direct billing benefits the claimants by eliminating the out-of-pocket costs when they use a network pharmacy. Pharmacies benefit by the reduction or elimination of delay in payment. The rule also provides an incentive to pharmacies to provide prescription drugs in cases where liability is controverted by the carrier by providing an extra dispensing fee, as well as an increase in price of 10 percent.
The rule will benefit self-insured employers and/or carriers by providing a set fee at which the pharmacy or claimant is to be reimbursed. A uniform standard for pricing will reduce the claims litigation which arises when there is a price difference between the price a carrier will pay and the actual costs incurred by a pharmacy or claimant. This rule also allows self-insured employers, carriers and their agents to select a pharmacy that can provide a cost savings and provide the same or better service to a claimant. The rule will benefit workers' compensation claimants by reducing the cost of prescriptions that a claimant pays for out of pocket, increasing timeliness as to the amount they will be reimbursed for prescription drug costs or durable medical equipment, increasing the use of direct billing to the carrier rather than out of pocket payments by a claimant.
The rule will also benefit the Board as it is anticipated that there will be a reduction in the number of hearings held to determine the proper amount of reimbursement to claimants for prescription drugs or durable medical equipment. The rule is also a benefit because it mitigates any adverse impact by using an existing fee schedule (the Medicaid pharmacy fee schedule) that is familiar to state agencies and insurance carriers. It promotes a uniform standard across state agencies utilizing a pharmacy fee schedule and by preventing the need to change multiple systems to administer claims.
4. Costs: There are additional costs for carriers or self-insured employers. They are liable for the cost of medications if they do not respond to a bill for prescription drugs sent by a pharmacy or claimant within 45 days. This cost does not apply if carriers or self-insured employers respond in a timely fashion as provided by the rule. This cost is also imposed by the legislation. There are costs associated with sending the required notices, such as those set forth as Appendices B and C to the claimant that a network pharmacy has been designated and the procedures to follow in utilizing the network pharmacy. However, in many cases the required notices can be sent with currently required forms so there should be limited additional postage necessary.
Pharmacies will have a minimal cost associated with posting a notice that they are part of a designated network and the procedures for the claimant to follow. The fee schedule will also reduce the amount that a pharmacy can charge for a drug, but that cost is offset by the savings to the Workers' Compensation system as a whole. It should be noted that fee schedules are used in many other areas such as Medicare, Medicaid, and No Fault Insurance which were implemented to reduce costs associated with these programs. Pharmacies will also see this cost offset by the reduction in administrative expenses associated with seeking reimbursement from the carrier since the carrier must pay or object within forty-five days and the fee schedule will eliminate controversies regarding the reimbursement cost of a drug. Overall, workers' compensation prescriptions comprise 3 percent of average pharmacy sales, and thus the impact of the savings from these regulations on overall pharmacy business are limited, and offset by the reduction in administrative expenses for reimbursement and by faster reimbursement from carriers. The procedures for processing bill payment and reimbursement are anticipated to remain the same; therefore, no additional costs associated with record keeping or processing claims will be incurred. The new rule will allow carriers, self-insured employers and their agents to contract with a pharmacy or network of pharmacies to provide prescription drugs or durable medical equipment, thus allowing them to negotiate for the lowest cost of providing such drugs or durable medical equipment. The use of a uniform price standard will reduce the number of hearings necessary to determine what amounts are due and owing to a claimant thus reducing the costs necessary for legal representation at the hearing. It is anticipated that costs will be reduced for claimants.
5. Local government mandates: A municipality or governmental agency that is self-insured is required to comply with the rules for reimbursement for prescription drugs and the rules for notice of a designated network pharmacy. Municipalities or governmental agencies have the option to designate a pharmacy network, however, the fee schedule will still afford substantial savings to a municipality or governmental agency if a pharmacy network is not designated. It is expected that the regulation will actually reduce costs by allowing self-insured local governments to negotiate for lower prescription costs with contracted pharmacies.
6. Paperwork: There are notification requirements that must be met by carriers, employers and pharmacies. Carriers are required by Section 13(i)(5) of the new legislation to provide notice to claimants that a pharmacy network has been designated and that claimants are required to use it to fill their prescriptions. The regulations specify the notice in Appendices B and C. Additionally, notice must be given to all employees when a carrier or self-insured employer contracts with a network so that when an employee is injured he or she knows to use a network pharmacy. This will eliminate the need for the claimant to pay out of pocket and to maximize the savings for the carrier or self-insured employer. When contracting with a network, a carrier or self-insured employer also has the option to establish a streamlined method of payment, eliminating the receipt of multiple bills for prescriptions. In addition, carriers are required to respond to a prescription bill within 45 days or they will waive any objection to payment of a prescription bill. Carriers are also required to certify annually to the Board that the pharmacies in the designated network are in compliance with the regulation. Employers are required to post notice in the workplace that a network pharmacy has been designated and the procedures for utilizing the network pharmacy as well as providing notice to the claimant. Pharmacies are required to post notice that the pharmacy has been designated as a network pharmacy and the procedures for filling prescriptions at that pharmacy. The existing procedure of submitting bills and reimbursement requests to the carrier, third party administrator, or self-insured employer will remain the same. While the regulation requires a number of notices, this is to ensure the claimant is aware of the arrangement with a network and the requirement to use the network to benefit carriers, claimants and employers through lower costs.
7. Duplication: There is no duplication.
8. Alternatives: Based upon the mandate of the Legislature to establish fee schedules, the Board is essentially required to promulgate regulations in order to ensure the orderly implementation of the proposed fee schedules. To fail to delineate the responsibilities of all participating parties would be imprudent as it would lead to confusion on the issue of timely payment and cause an increase in the number and length of hearings required to resolve this issue. An alternative pharmacy fee schedule was developed using other states fee schedules as a model. Other states generally use a formula consisting of the average wholesale price (“AWP”) plus or minus a percentage which varies between plus 40% and minus 12%. The formula may or may not include a dispensing fee which varies between $3.00 and $8.70 depending on the state. California has adopted that State's Medicaid fee schedule known as MediCal. The experience in California has produced great savings and there have been no issues regarding claimant's ability to obtain prescription medications.
Initially, the Board considered using the average wholesale price minus 15 percent, or the Medicare fee schedule. It was also suggested by the Pharmacy Alliance that a pharmacy fee schedule be developed to use the average wholesale price plus five dollars for brand name drugs and average wholesale price plus 10 percent plus five dollars for generics. These proposals were judged to be too high to provide significant savings, which would defeat the legislative purpose for the rule.
Rather, it was determined to use the Medicaid fee schedule set by the Department of Health, as it is set for New York, widely known and would generate sufficient savings.
Discussions about the content of the regulations were held with the Assembly and Senate as well as the Business Council of New York State and the AFL-CIO who provided comments and suggestions to be considered in the regulations.
9. Federal standards: There are no applicable Federal Standards.
10. Compliance schedule: The proposed regulation is mandatory. All affected carriers and self-insured employers will have to use the proposed fee schedules beginning on July 11, 2007.
Regulatory Flexibility Analysis
1. Effect of rule:
Approximately 2511 political subdivisions currently participate as municipal employers in self-insured programs for workers' compensation coverage in New York State. As part of the overall rule, these self-insured local governments will be required to file objections to prescription drug bills or durable medical equipment bills if they object to any such bills. This process is required by statute. This rule affects members of self-insured trusts, some of which are small businesses. Typically a self-insured trust utilizes a third party administrator or group administrator to process workers' compensation claims. A third party administrator or group administrator is an entity which must comply with the new rule. These entities will be subject to the new rule in the same manner as any other carrier or employer subject to the rule. Under the rule, objections to a prescription bill must be filed within 45 days of the date of receipt of the bill or the objection is deemed waived and the carrier, third party administrator, or self-insured employer is responsible for payment of the bill. Additionally, affected entities must provide notification to the claimant if they choose to designate a pharmacy network, as well as the procedures necessary to fill prescriptions at the network pharmacy. If a network pharmacy is designated, a certification must be filed with the Board on an annual basis to certify that the all pharmacies in a network comply with the new rule. The new rule will provide savings to small business and local government by reducing the cost of prescription drugs by utilization of a pharmacy fee schedule instead of retail pricing. Litigation costs associated with reimbursement rates for prescription drugs will be substantially reduced or eliminated because the rule sets the price for reimbursement. Additional savings will be realized by utilization of a network pharmacy and a negotiated fee schedule for network prices for prescription drugs.
2. Compliance requirements:
Self-insured municipal employers, self-insured non-municipal employers are required by statute to file objections to prescription drug bills or durable medical equipment bills within a forty five day time period if they object to the bill, otherwise they will be liable to pay for the bill if the objection is not timely filed. Notice to the injured worker must be provided outlining that a network pharmacy has been designated and the procedures necessary to fill prescriptions at the network pharmacy. Certification by carriers and self-insured employers must be filed on an annual basis with the Board that all the pharmacies in a network are in compliance with the new rule.
3. Professional services:
It is believed that no professional services will be needed to comply with this rule.
4. Compliance costs:
This proposal will impose minimal compliance costs on small business or local governments which will be more than offset by the savings afforded by the fee schedule. There are filing and notification requirements that must be met by small business and local governments as well as any other entity that utilizes a pharmacy network. Notices are required to be posted in the workplace informing workers of a designated network pharmacy. Additionally, a certification must be filed with the Board on an annual basis certifying that all pharmacies within a network are in compliance with the rule.
5. Economic and Technological Feasibility:
There are no additional implementation or technology costs to comply with this rule. The New York State Department of Health Medicaid Office has the fee schedule posted on the Medicaid website. Since the Board stores its claim files electronically, it has provided access to case files through its eCase program to parties of interest in workers' compensation claims. Most insurance carriers, self-insured employers and third party administrators have computers and internet access in order to take advantage of the ability to review claim files from their offices. Further, the Board already provides information for the general public on its website. The Board will provide access to the fee schedule through its website or by providing a link to the Department of Health Medicaid Office. No other additional equipment or software is needed for access to the fee schedule other than an existing web browser and a computer with internet access.
6. Minimizing adverse impact:
This proposed rule is designed to minimize adverse impacts to all insurance carriers, employers, self-insured employers and claimants. The rule provides a process for reimbursement of prescription drugs as mandated by WCL section 13(i). Further, the notice requirements are to ensure a claimant uses a network pharmacy to maximize savings for the employer as any savings for the carrier can be passed on to the employer. The costs for compliance are minimal and are offset by the significant savings by using Medicaid as the index for a pharmacy fee schedule instead of reimbursement at retail prices as currently exists.
7. Small business and local government participation:
The Assembly and Senate as well as the Business Council of New York State and the AFL-CIO provided input on the proposed rule.
Rural Area Flexibility Analysis
1. Types and estimated numbers of rural areas:
This rule applies to all carriers, employers, self-insured employers, third party administrators and pharmacies in rural areas. This includes all municipalities in rural areas.
2. Reporting, recordkeeping and other compliance requirements:
Regulated parties in all areas of the state, including rural areas, will be required to file objections to prescription drug bills or durable medical equipment bills within a forty five day time period or will be liable for payment of a bill. The new requirement is solely to expedite processing of prescription drug bills or durable medical bills under the existing obligation under Section 13 of the WCL. Notice to the injured worker must be provided outlining that a network pharmacy has been designated and the procedures necessary to fill prescriptions at the network pharmacy. Carriers and self-insured employers must file a certification on an annual basis with the Board that all the pharmacies in a network are in compliance with the new rule.
3. Costs:
This proposal will impose minimal compliance costs on carriers and employers across the State, including rural areas, which will be more than offset by the savings afforded by the fee schedule. There are filing and notification requirements that must be met by all entities subject to this rule. Notices are required to be posted and distributed in the workplace informing workers of a designated network pharmacy and objections to prescription drug bills must be filed within 45 days or the objection to the bill is deemed waived and must be paid without regard to liability for the bill. Additionally, a certification must be filed with the Board on an annual basis certifying that all pharmacies within a network are in compliance with the rule. The rule provides a reimbursement standard for an existing administrative process.
4. Minimizing adverse impact:
This proposed rule is designed to minimize adverse impact for small businesses and local government that already exist in the current regulations. This rule provides a benefit to small businesses and local governments by providing a uniform pricing standard, thereby providing cost savings reducing disputes involving the proper amount of reimbursement or payment for prescription drugs or durable medical equipment. The rule is also a benefit because it mitigates any adverse impact by using an existing fee schedule (the Medicaid fee schedule) that is familiar to state agencies and insurance carriers that encounter the Medicaid pharmacy fee schedule. It promotes a uniform standard across state agencies utilizing a pharmacy fee schedule and by preventing the need to change multiple systems to administer claims.
5. Rural area participation:
Comments were received from the Assembly and the Senate, as well as the Business Council of New York State and the AFL-CIO regarding the impact on rural areas.
Job Impact Statement
The proposed amendment will not have an adverse impact on jobs. This amendment is intended to provide a standard for reimbursement of pharmacy and durable medical equipment bills.
