High Prices for Drugs Dispensed by Doctors Stoke Controversy

Loopholes in some states’ workers' compensation laws allow dramatic markups for medications dispensed in a physician’s office, the New York Times reports.

In certain states, medications dispensed at a physician’s office are subject to steep markups that end up costing taxpayers, insurance companies, and employers dearly, according to a July 11, 2012, article in the New York Times.

The practice is most prevalent among physicians who treat injured workers, since loopholes in workers' compensation laws allow extreme price hikes under these circumstances. According to the Times, outside firms specialize in helping physicians set up in-office pharmacies by providing billing software and connecting them with suppliers who repackage medications for office sale. The physicians sell the drugs, but they do not collect the payments from insurers. Instead, the outside firm pays participating physicians 70% of what they charge, and then collects the full amount from insurance companies.

Profits from the practice are split between physicians, middlemen who help the physicians start in-office pharmacies, and drug distributors who repackage medications for office sale, the Times stated. Fueled by outrage at what appears to be price gouging, states such as California and Oklahoma have limited the practice, and it is currently under contention in other states, including Florida, Hawaii, and Maryland.

Some physicians, however, maintain that the practice offers injured patients prompt access to necessary medications that they might otherwise not get for days due to the complexity of workers' compensation systems.