Dealing with Drugs in the Medicare Set-Aside

10.22.2019 Blog

The prescription component of a Medicare Set-Aside allocation may at times present an obstacle to the settlement of the claim. There are however certain steps which may be taken during the life of a claim to help ensure the lowest possible prescription allocation. This article will provide background on the drug pricing structure in the MSA and outlines best practices to follow for ensuring a favorable drug allocation.


 Average Wholesale Pricing (AWP) and Medicare Coverage of Drugs
The Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) Reference Guide, Version 2.9 outlines the prescription drug review process used by CMS’ Workers’ Compensation Review Contractor (WCRC). Section notes that all drug products are priced using average wholesale pricing (AWP), with generic drugs being priced at the lowest non-repackaged generic AWP. The WCRC prices for a generic drug unless a brand name drug is being filled or the claimant/claimant’s attorney insists on a brand-name drug in writing. When a condition requires certain drugs, but the submitted proposal does not include drugs, the WCRC will include pricing for brand name medications.

By way of background, AWP is a measure for the pricing and reimbursement rates for prescription drugs that has been used by both the government and private payers for decades. It was originally created in 1969 as a reference price for examining California Medicaid claims. Most prescription drugs sold in the US have an AWP that is published in major drug compendium, such as Red Book. The AWP may be reported to the publisher directly by the manufacturer of the drug or it may be calculated by the publisher, based upon the manufacturer’s mark-up for the drug. The mark-up is added to the Wholesale Acquisition Cost (WAC), or the list price for a drug sold by a manufacturer to a wholesaler. The list price excludes any rebates or discounts available to the wholesaler. The publisher then sells the published AWP list to the government, private insurers or other buyers of the prescription drugs that use it to establish reimbursement rates for the drugs. The price a consumer pays for a prescription from the pharmacy may vary greatly from the retail price the pharmacy paid to acquire the drug given the complicated payment models used to determine the price of a drug.

The WCMSA Reference Guide further explains that the WCMSA includes drugs being used for a condition related to the workers’ compensation injury which are covered by Medicare Parts D or B and which are being used for a medically accepted indication. The WCRC reviewers look to Medicare Part D and Part B guidance documents, current WCRC operating rules, the Part D formulary reference guide and recognized drug compendia. A drug is generally covered by Medicare Part D when it is being used for a “medically accepted indication.” A medically accepted indication is any use for which the drug is approved by the FDA, or a use which is supported by one or more citations included or approved in the recognized compendia. The WCRC is currently using Micromedex’s Drug Dex database and the American Hospital Formulary Service Drug Information data base as their recognized compendia.

Shaping a Favorable Drug Allocation

Establish a generic drug usage pattern
Generic drugs typically cost significantly less than brand name drugs. A comparison of the Red Book AWP for Pregabalin, the recent generic for Lyrica, and the brand name Lyrica provides a stark example of this. At this time, the lowest AWP non-repackaged per unit cost of Pregabalin 75 mg capsule is $0.92, while the brand name Lyrica 75 mg capsule is $9.36. This generic is therefore approximately 90% less than the cost of the brand name. Given the huge savings in the future prescription component of the MSA, it behooves the adjuster/attorney to be mindful of the availability of generic substitutes in a case.

Generic drug usage patterns may be established in several ways. The simplest of course would be to have the treating physician agree to change the brand name drug to the generic. Once this occurs, it is important to establish controls with the pharmacy to ensure that only the generic drug is dispensed. It may also be helpful to work with opposing counsel and the claimant to effectuate this change in connection with settlement discussions.

Consider and identify less expensive combinations to achieve the same drug dosageCertain doses of drugs are associated with a much higher AWP per unit than slightly lower doses of the same drug. Since the slight change in the dose may not impact the symptom relief provided by the drug, treating physicians have been agreeable to make the change upon request.

An example of this may be seen in the AWP per unit for Morphine Sulfate CER 80mg and Morphine Sulfate CER 60 mg. According to Red Book, Morphine Sulfate CER 80mg has a per unit cost of $15.13, while the Morphine Sulfate CER 60 mg has a per unit cost of $11.36 per unit. Changing the form of the drug may also result in cost savings. By reviewing data from Red Book’s AWP pricing, a case manager may be able to help identify drug doses that both benefit the claimant and mitigate against excessive drug projections in the MSA.

Determine if the drug is FDA approved or off label compendia approved for the injury related condition
Not all drugs being paid as part of the workers’ compensation claim are covered by Medicare. It is important to obtain the medical reports that are generated in connection with the prescription to correlate the reason for the drug and the diagnosis. If the workers’ compensation drug is not covered by Medicare, it may be funded outside of the MSA.

Investigate pre-injury usage of the drugs
Pre-injury medical and pharmacy records may at times provide information which may be used to support the exclusion of certain drugs in the MSA. For example, a review of the pharmacy and/or medical records may show a relevant pattern of current drug usage immediately before the injury. Don’t neglect to apply the analysis used to defend the workers’ compensation claim to the development of the MSA projections. The additional investigation and customization of arguments to limit the projections will oftentimes yield a far lower allocation than one which is driven by a “cookie-cutter,” formulaic approach.

Explore alternative pain management approaches
Drugs are not the only way to manage pain. Alternative pain management approaches may include cognitive behavioral therapy, acupuncture, yoga and in some jurisdictions CBD oil and medicinal marijuana. Consideration of and implementation of these alternative therapies may result in significant cost savings down the road and yield a better outcome for the claimant.

Implement pharmacy controls to prevent inadvertent payment of drug for denied condition.
The defense strategy of a claim should also take Medicare Secondary Payer compliance strategy into account. If a condition is denied, it is important to avoid making payment for medication related to that condition. CMS reviewers look to payment histories to determine if a condition has truly been denied by the carrier. When certain conditions are accepted and others are denied, it is imperative that pharmacy controls are set up to prevent an inadvertent payment of a drug that is being used for a denied condition.

Excessive drug projections in an MSA may be prevented through strategic case management which considers potential Medicare Secondary Payer compliance issues during the life of the claim. By establishing a best practices format to follow, claims handlers/attorneys may help to ensure that the future drug projections are as low as possible under the circumstances.

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.