September 16, 2011
The Honorable Edmund G. Brown
Governor of California
C/O State Capitol, Ste. 1173
Sacramento, CA 95814
Via facsimile: (916) 558-3160
SUBJECT: AB 378 — Pharmaceutical Costs (REQUEST FOR SIGNATURE)
Dear Governor Brown:
The Orange County Business Council (OCBC), representing the largest and most innovative
employers in America’s sixth largest county is writing in support of AB 378, which would curb
the rising medical costs in California’s workers’ compensation system by removing the
incentives for physicians to over-prescribe compound drugs and to establish a sensible
reimbursement rate for such products, until a fee schedule can be formally adopted.
The use of compound medication in the workers’ compensation system was primarily used to
assist injured workers that could not manage medication in its standard formulation. However,
in the last several years, there has been a sharp increase in usage and costs of compound
drugs. Because compound medications are specialty products designed specifically for
individual patients, they currently are not covered by the Medi-Cal fee schedule, even though
most or nearly all of the active components of the compound are on the fee schedule. This
creates an opportunity for some pharmacists and physicians to prescribe and charge fees
beyond what would be allowed for pharmaceutical treatments within the fee schedule. Costs
pressures are added to the workers’ comp system, which in turn leads to higher costs for
insurers and higher premiums for employers.
This bill is a good start at establishing guidelines to the compounding of drugs and under what
circumstances they would be covered. Specifically, AB 378 removes the financial incentives for
physicians to prescribe compound drugs by adding pharmacy goods to a list of medical goods
and services for which it is unlawful for a physician to refer patients if the doctor has a financial
stake in the pharmacy. This ensures that the physician solely has the patient’s well being in
mind when prescribing compound drugs and it would establish a set and reasonable
reimbursement rate until the administrative director of the Division of Workers’ Compensation
can adopt an official medical fee schedule for compound drugs.
For these reasons, OCBC supports AB 378 and respectfully requests that this legislation be
signed into law.
Sincerely,
Kate Klimow
Vice President of Government Affairs