Answers by Amy

7.29.2020 Blog

Prescription drugs can make up a large part of a Medicare Set-Aside.  Since Medicare prices future prescription drugs using average wholesale price, the ultimate cost of the drugs through a pharmacy benefits manager (PBM) is often less than the average wholesale price.  The question posed is: “I would like to price out the future drugs based on the pricing we have available through our PBM.  Can I do this?”

At least as of the writing of this answer, submission of Medicare Set-Aside is still voluntary.  Should you choose to submit your MSA to Medicare for approval, the only pricing methodology CMS presently accepts for pricing prescription drugs is average wholesale price.  This is true even in states with a medication fee schedule; CMS ignores those fee schedules.  CMS does not acknowledge PBM pricing in its MSA review process.

With that noted, since the submission process is voluntary, you still have other options beyond traditional submission.  The main question is whether the methodology you use in allocating future medical costs for a non-submit MSA will result in a cost shift to the Medicare program.  If, as is sometimes the case with self-insurer programs, you are able to keep the claimant in your PBM indefinitely, pricing future medical using PBM pricing could be acceptable.  However, if the claimant will no longer have access to the PBM post-settlement, using the PBM pricing may no longer be considered reasonable since the claimant will need to obtain their medication at retail prices higher than PBM pricing.

You may also have alternatives available for prescription drug mitigation.  Perhaps the claimant is on a brand name drug and can be moved to a less expensive generic.  Perhaps the claimant is no longer taking the medication; all that is needed is documentation from the doctor supporting this to remove the drug from the MSA.  Perhaps the medication is one that is not safe to take over the entire life expectancy, such as drugs on the Beers list which are unsafe for seniors to take indefinitely, so alternative medications could be priced or pursued.

Despite Medicare’s often “cookie-cutter” methodology for pricing future medical and prescription drugs, we all know post-settlement medical treatment is not that straightforward.  Medications change and conditions wax and wane.  Accordingly, mitigation strategies for MSAs should always be considered, just as you would consider cost mitigation strategies during the pendency of the workers’ compensation claim itself.  Our MSAs are all written and proofed by attorneys with backgrounds in workers’ compensation claims, which means we look at our MSAs with an eye toward these mitigation strategies.  If you have a case which is difficult to settle because the MSA is too large due to prescription drugs, we would love to help you develop mitigation strategies for that case, whether you submit the MSA for approval or not.

The NBKL blog is provided for informational purposes; we are not giving legal advice or creating an attorney/client relationship by providing this information.  Before relying on any legal information of a general nature, you may consider consulting legal counsel as to your particular facts and applications of the law.