The California Division of Workers’ Compensation (DWC) has proposed a third round of modifications to its pharmaceutical fee schedule. This formal rulemaking process began in February 2024 to align the fee schedule with the state’s current Medicaid (“Medi-Cal”) reimbursement system as required by statute. The third round includes modifications and updates to the rule text and the data files to be used with the rules. Any written comments to the DWC on these latest modifications are due October 23.
Third Round Proposed Modifications
Based upon public comments received regarding reimbursement for compounds, the DWC removed the prior proposed distinction in reimbursement for a “finished” v. “unfinished” drug product (ingredient).
With the proposed modification, unfinished drug products will be reimbursed similar to finished drug products and will not factor in “documented paid cost of each unfinished drug product ingredient … plus 10%” as was previously proposed.
This means that:
- Finished drug products will be reimbursed at the “lowest cost,” or “no substitution cost” for a brand name drug where the applicable prerequisites are met
- Unfinished drug products will be reimbursed at the “lowest cost” (because the brand name concept would not apply).
This is consistent with drug reimbursement for non-compounded medications. The sample fee schedule file has also been modified to include unfinished bulk pharmaceutical ingredients.
While this overall reimbursement structure applies to both pharmacies and dispensing physicians, it’s important to note that reimbursement for physician-dispensed compounds will still be subject to an additional limit of 300% of or 20% above documented paid cost, whichever is lower. That additional cost control is a pre-existing provision required by a statute the DWC cannot change.
Both the fee schedule file (used to determine the “lowest cost” and “no substitution cost” calculations for ingredient reimbursement) and NPI file (used to determine which pharmacies receive the higher of the two dispensing fees) have been updated to use more current Medi-Cal data. The DWC also made additional, less substantive language edits to reorganize the rule text for clarity and simplification.
What did not change
The remainder of the previously proposed provisions have been kept in the text for this latest round. Those provisions include:
- Overall reliance on the Medi-Cal benchmarks for the “lowest cost” and “no substitution cost” ingredient reimbursement (NADAC, WAC, FUL, MAIC)
- Two dispensing fees for pharmacies ($10.05 or $13.20) depending on their volume of prescriptions with the Medi-Cal program, with lower-volume pharmacies eligible for the higher dispensing fee indicated on the NPI file
- The $10.05 dispensing fee allowed for dispensing physicians
- Additional compounding and sterility fees allowed for both pharmacies and physicians, where applicable
- After the effective date and ongoing, required use of the updated fee schedule and NPI files for reimbursement by payers not later than the second calendar day after posting by the DWC on its website (estimated to be posted weekly by the DWC), with payers instructed to re-adjudicate previously paid claims/transactions to correct upon submission of a provider’s request for second bill review (SBR)
- Prospective (not retroactive) application of the modified fee schedule rules with an approximately six-month implementation time from adoption until the effective date (specifically, the first day of the month following 180 days after the amendments are filed with the Secretary of State)
MyMatrixx actions
MyMatrixx participated in the first two rounds of rulemaking, attending the initial public hearing and submitting written comments. We intend to submit another set of comments to the DWC as part of this latest round, and we continue to encourage the state to adopt policy that makes sense for our clients, contains costs, and prioritizes medication safety for injured workers.
We applaud the DWC for removing the complicated “document paid cost” standard for reimbursing pharmacies for unfinished drug ingredients in compounds. While we understand the original intent, that previously proposed language would likely have led to delays in the billing and reimbursement process, disagreements among stakeholders, and increased disputes in the system. We are also thankful the DWC has kept the six-month implementation timeline added in the prior round, which should enable stakeholders sufficient time to develop system capabilities and processes to comply with these changes once adopted.
Unfortunately, the DWC chose to keep the provision proposed in their second round affording dispensing physicians an additional $10.05 for dispensing medications from their office to injured workers. We continue to believe this may encourage physician dispensing. We believe the practice of physician dispensing bypasses the benefits of a pharmacy benefit manager and ignores critical patient safety alerts that are typically identified and communicated to retail pharmacies before medications are dispensed.
Comments
The DWC is accepting written comments on this latest round of proposed modifications until 11:59 pm on October 23. It requests those comments be limited to the latest modifications. Written comments should be submitted to:
Maureen Gray
Regulations Coordinator
Department of Industrial Relations
Division of Workers’ Compensation
1515 Clay Street, 18th Floor
Oakland, CA 94612
Written comments may also be submitted by FAX, addressed to the above-named contact at (510) 286-0687, and via email to dwcrules@dir.ca.gov.
More details can be viewed on the DWC website here.
For more policy developments like this in workers’ compensation impacting pharmacy in states across the country, please visit and bookmark Statehouse Watch at MyMatrixx.com.