A Pennsylvania appellate court Tuesday said a workers compensation hearing officer improperly ordered an insurer to reimburse a drug company for costs in an injured worker case based on values published by IBM Watson Health in its Red Book.
The Commonwealth Court, in reversing the hearing officer, sided with Federated Insurance Co. in a dispute with Summit Pharmacy over $72,500 the insurer was ordered to pay Summit for generic drugs.
The hearing officer used Red Book values to calculate the reimbursement amount, which the state Workers’ Compensation Bureau adopted as the average wholesale price to be used in resolving payment disputes.
Red Book is a privately published compendium of drug average wholesale pricing.
Federated Insurance argued the bureau’s adoption of Red Book values in payment disputes violates the state’s Workers’ Compensation Act, which limits drug reimbursement to 110% of a drug’s average wholesale price.
While average wholesale price is not defined in the statute, the appeals court said case law determined it to be an objective cost estimate based on national pricing.
The pharmaceutical company argued Red Book values are an accepted industry source used for drug pricing reimbursement.
The Commonwealth Court concluded that Red Book values are at odds with state law, and while it reversed the decision ordering the drug cost reimbursement, it ordered the hearing officer to stay the proceedings until the workers comp bureau identifies a nationally recognized schedule of average wholesale pricing to be used in future payment disputes.