GFRG Client Advisory Update 4/7/09: WCMSA Prescription Drug Pricing

Posted by John Cattie

To download a pdf of this advisory, click here.

On April 3, 2009, the Centers for Medicare and Medicaid Services (“CMS”) issued a memorandum (the “Memo”) related to Medicare Set-aside Arrangements (“MSAs”) for Workers’ Compensation (“WC”) settlements. This memorandum promulgates CMS procedures for pricing future prescription drug treatment costs/expenses as they relate to Workers’ Compensation MSA proposals (“WCMSAs”).

Effective June 1, 2009, CMS will begin pricing future prescription drug treatment costs/expenses in WCMSAs independently. If the WC injuries in the WCMSA warrant the need for prescription drugs for the ongoing treatment of the WC related injury, CMS will apply the average wholesale price of the prescription drug to calculate the prescription drug amount. CMS will disregard any other pricing, discounting or calculation methods when determining the accuracy of the prescription drug amounts contained in WCMSA proposals.

Furthermore, CMS may apply brand name average wholesale prices instead of generic brand wholesale prices. The Memo advises that, if the WCMSA proposal does not contain an amount for prescription drug treatment and CMS determines prescription drug treatment is warranted, it will default to pricing using the average wholesale price for brand name drugs. If the WCMSA proposal contemplates the use of generic drugs, and no generic drug is available to treat that condition, CMS will default to pricing using the average wholesale price for brand name drugs to determine the adequacy of the prescription drug amount.

This Memo provides clarity as to how CMS calculates amounts related to prescription drugs. It also serves to warn practitioners that, in creating WCMSAs, the parties should be careful to properly consider Medicare’s interests as it relates to prescription drugs. WCMSA proposals which gloss over the applicable prescription drugs may be found to be insufficient, thus leading to additional costs to properly consider Medicare’s interests for you and your clients.

To view the Memo in its entirety, click here.