Looking at a proposed 8.9 percent rate increase for next year, Insurance Commissioner Kevin McCarty and business groups Tuesday criticized a controversial drug-dispensing practice that they say drives up workers' compensation insurance costs.
The practice involves doctors dispensing what are known as "repackaged" drugs to injured workers, rather than writing prescriptions to be filled at pharmacies. Critics say prices for the repackaged drugs are inflated -- and account for 2.5 percent of the proposed 8.9 percent average rate increase for businesses.
"This is a cost spike,'' McCarty said. "What we're seeing in the physician-dispensed drugs and the repackaging is a real problem.''
McCarty and other regulators held a three-hour hearing about the proposed rate hike, which the National Council on Compensation Insurance submitted to the state in August. If approved, the proposal would mark the second straight year of rate increases after a 2003 system overhaul led to plummeting premiums.
Even with the proposed increase, average rates would be 58.6 percent below peak levels before the overhaul, said Lori Lovgren, state relations executive for NCCI, which submits rate proposals for the insurance industry. The proposed increase translates to about $140 million in additional premiums.
"We believe 8.9 (percent) is the right number,'' said Tony DiDonato, senior actuary with NCCI. "It's the bare minimum.''
But Bill Herrle, executive director of the National Federation of Independent Business in Florida, said workers' compensation rate increases hurt the ability of small businesses to add jobs. He urged regulators to keep the increases as small as possible.
The most pointed segment of the hearing focused on the physician drug issue, which also touched off lobbying during the 2010 and 2011 legislative sessions. Former Gov. Charlie Crist in 2010 vetoed a measure that would have limited costs of physician-dispensed drugs to workers' compensation patients, and a similar proposal died this spring.
The issue centers on drugs that are repackaged in small amounts, as opposed to bulk supplies purchased by pharmacies. Repackaging affects the drug pricing, which allows doctors to charge more than pharmacies in the workers' compensation system.
Supporters of physician dispensing, including the Florida Medical Association, argue that the practice benefits workers' compensation patients. They say it can lead to patients being more likely to take medications than if they have to go to pharmacies, ultimately helping patients return to work faster.
"There's a huge issue of compliance,'' said Greg McDermott, an attorney for Automated HealthCare Solutions, a Miramar-based company that sells technology used in dispensing and has opposed changes in the system.
McDermott told regulators during the hearing that he thinks a comprehensive study would be needed to determine what effect legal changes would have on the costs. He said asking patients to fill prescriptions at pharmacies might not be the most cost-effective way to treat them.
But McCarty said he was "flummoxed" by arguments that it is important to allow physician-dispensing for workers' compensation patients.
"I've been going to a doctor for 40 years, and I have never, ever had a physician dispense drugs,'' he said.
McCarty said he expects to take up the drug issue Nov. 16 during the meeting of a panel that looks at cost drivers in the workers' compensation system. But ultimately, lawmakers would need to make any changes.
The issue affects influential lobbies, including business groups, doctors and Automated HealthCare Solutions, which is a major Republican donor.
Teye Reeves, a lobbyist for the Florida Chamber of Commerce, said limiting the amounts that can be charged for repackaged drugs will be a top priority for her business group during the 2012 session. She said the increased drug charges are an "unnecessary cost" passed on to businesses.
Herrle, however, expressed concern that he has not seen a lot of legislative interest in taking up workers' compensation issues this session, including the drug costs. He said he doesn't want to put off taking action while rates continue to rise.
"First of all, it (the drug issue) is a food fight,'' Herrle said. "Recognize, it's going to be ugly.''
