The Texas Workers' Compensation Commission (the commission) adopts amendments to §134.503 and §134.504 with no changes to the proposed text published in the October 31, 2003, issue of the Texas Register (28 TexReg 9413).

As required by the Government Code §2001.033(1), the commission's reasoned justification for these rules is set out in this order, which includes the preamble, which in turn includes the rules. This preamble contains a summary of the factual basis of the rules, a summary of comments received from interested parties, names of those groups and associations who commented and whether they were for or against adoption of the rules, and the reasons why the commission disagrees with some of the comments and proposals.

The commission held a Public Hearing on December 17, 2003 regarding the proposed changes to §134.503 and §134.504. No changes were made to proposed rules in response to public comment received in writing and from the Public Hearing.

These amendments to §134.503 and §134.504 are made to implement a statutory change enacted by the 78th Texas Legislature, 2003, pursuant to House Bill 833 (HB833), which provides a means for an injured employee to be responsible for paying the difference between the cost of the brand name drug and the cost of the generic pharmaceutical drug or the cost of an over-the-counter alternative to a prescription drug. The injured employee may not seek reimbursement for the difference in cost from an insurance carrier and is not entitled to use the medical dispute resolution provisions of Chapter 413 of the Texas Labor Code with regard to the amount charged by the health care provider. As a result of this new statutory language, a health care provider's receipt of payment from an injured employee does not violate §413.042 of the Texas Labor Code concerning Private Claims; Administrative Violation. There is no change to the duty of a health care provider to prescribe generic prescription drugs when available and clinically appropriate and to prescribe over the counter medications in lieu of a prescription drug when clinically appropriate.

More specifically, these amendments allow an injured employee to purchase a brand name drug rather than a generic pharmaceutical medication or over-the-counter alternative to a prescription medication if a health care provider prescribes a generic pharmaceutical medication or an over-the-counter alternative to a prescription medication.

Section 134.503(b), regarding Reimbursement Methodology, establishes the manner in which a pharmacist should dispense a drug when it is prescribed or when a prescription does not require the use of a brand name drug; it also establishes the manner in which a pharmacist should dispense a brand name drug when the injured employee chooses to receive a brand name drug instead of the prescribed generic drug. The rule as amended allows an injured employee to decline a generic drug and to opt for a brand name drug by agreeing to pay the additional cost.

Section 134.504, regarding Pharmaceutical Expenses Incurred by the Injured Employee, addresses the requirements to provide a means in which the injured employee is responsible for paying the difference between the cost of the brand name drug and the cost of the generic pharmaceutical medication, or of an over-the-counter alternative to a prescription medication. Section 134.504(b), as amended, addresses the statutory prohibitions against an injured employee's seeking reimbursement for the difference in cost from an insurance carrier or use of the medical dispute resolution provisions of Chapter 413 with regard to the prescription. Section 134.504(b) provides the process and the responsibilities of the dispensing health care provider, the injured employee and the insurance carrier when an injured employee chooses to pay the difference in cost between generic and brand name drugs.

In addition to adopting these amended rules pursuant to Texas Labor Code §408.028(e) and HB833, the commission is concurrently proposing separate rule amendments related to §134.800, concerning Required Billing Forms and Information, and §134.802, concerning Insurance Carrier's Submission of Medical Bills to the Commission, which are also necessary to assist pharmacies in submitting claim information, as required by HB-833.

Comments supporting the proposed rule amendments were received from the following groups or associations: Apollo Enterprises, Inc.; Working Rx, Inc.; Insurance Council of Texas; PMSI; and Texas Pharmacy Association.

Comments opposing the proposed amendment to §134.503 and §134.504 were received from the following groups or associations: Apollo Enterprises, Inc.; Working Rx, Inc.; EZRX, Pharmacies; Medifax EDI; Pharmacy Management Company; Pharmacy Management Corporation; PMSI; and ReCept Pharmacy LP.

In addition to supporting or opposing various portions of the rules, commenters made suggestions for improvements to the rules or asked for clarification on certain points. Such comments containing recommendations were received from the following groups or associations: Apollo Enterprises, Inc. and Working Rx, Inc.; PMSI; and Texas Mutual Insurance Company.

Summaries of the comments and commission responses are as follows:

§134.503 and §134.504 - General

COMMENT: Commenters expressed concern that the injured employee is currently allowed to receive brand name drugs with no out-of-pocket expense, indicating that it would be very difficult to encourage an injured employee to change to a generic prescription later in the course of therapy. Also, commenter indicated that, on average, the cost of a brand name drug is $100 more per prescription than the generic drug. Commenter stated this would lead to the injured employee's convincing the treating doctor to write future prescriptions for brand name drugs, resulting in an unintended overutilization of brand name drugs and, therefore, increased system costs.

RESPONSE: The commission recognizes that in some cases the cost difference between generic and brand name drugs may be significant, which is a factor to be considered by the employee in making the decision between the two drugs. By requiring the dispensing health care provider to calculate the cost difference between the two drugs, §134.504(b) allows the injured employee to have the information necessary to make an informed purchasing decision. The commission disagrees with the commenter's prediction that the injured employee will encourage the prescribing health care provider to write future prescriptions for brand name drugs. This is because Texas Labor Code §408.028(e), which mandates these rule amendments, specifically states that it does not affect the duty of a health care provider to comply with another requirement of Texas Labor Code §408.028, to use generic pharmaceutical medications and clinically appropriate over-the-counter alternatives to prescription medications unless otherwise specified by the prescribing doctor.

COMMENT: Commenters maintain that the amended rules will lead to increased payment disputes and subsequent denials because they require pharmacies to calculate the price of a drug that was prescribed but not dispensed, and then calculate the price of a drug that was dispensed but not prescribed. Commenters argued that these additional calculations, together with notifying and collecting the price difference from the injured employee, tracking the billed versus dispensed amounts, and managing the differences in accounts receivable records will place an undue administrative burden on pharmacies which, ultimately, may cause pharmacies to refuse to accept workers' compensation patients.

RESPONSE: The commission disagrees that the amended rules will produce more medical fee disputes, because the rules provide a calculation methodology for the cost difference of generic and brand name drugs. Indeed, there should be fewer such disputes because §408.028(e) of the Act does not allow the injured employee to seek reimbursement for the difference in cost from an insurance carrier or use the medical dispute resolution process with regard to the prescription. For these same reasons, it is imperative that the amount paid by the injured employee be as accurate as possible and that the injured employee be able to make an informed decision about whether to accept the prescribed generic drug or over-the-counter alternative, or choose to pay for the difference in cost between the brand name drug and the generic drug or over-the-counter alternative. While the commission acknowledges that the amended rules may create additional work for the pharmacist, it also recognizes that the legislature, in requiring these rule amendments, has weighed the competing concerns of the pharmacist and the injured employee and found that, on balance, the needs of the injured employee outweigh any potential negative impact on the pharmacist.

COMMENT: Commenters opposed the rule amendments, requesting that the commission delay their implementation or withdraw them until their impact can fully be evaluated and until simultaneous changes to the billing regulations can be adopted. Commenters further asserted that the commission does not have the authority to implement one section of HB833, regarding pharmaceutical benefits, without implementing other provisions of HB833, regarding provider billing procedures.

RESPONSE: The commission disagrees. HB833 requires the commission to adopt the rules regarding pharmaceutical benefits by March 1, 2004; a separate provision of HB833 requires the commission, in adopting these amended rules, to make any necessary changes to the commission's rules under §134.800 to assist pharmacies in complying with the change in law made by HB833. The commission is proposing, concurrently with the adoption of these rule amendments, changes to §§134.800 and 134.802 that are necessary for pharmacy and system-wide billing procedures.

COMMENT: Commenters stated the commission has failed to draft proposed rules that implement all the provisions of HB833, and thus has failed to meet the legislative intent.

RESPONSE: The commission disagrees. HB833 establishes different time requirements for rule development in separate sections of the bill. HB833 Section 2 (b) requires the commission to adopt, not later than six months after the date a rulemaking petition is submitted to the commission, rules that clearly define the methodology for determining payment amounts for prescription drugs under the Act. A rulemaking petition has not yet been submitted to the commission.

COMMENT: Commenter opposed the rules as proposed indicating that the focus of HB833 is to give the injured employee the ability to choose a brand name drug over a prescribed generic drug. Commenter stated that injured employees who choose to receive brand name drug might experience financial costs. Commenter further indicated that the proposed rules will not expand this access to brand name drugs and will cause significant financial impact to the injured employee and increased costs to the system.

RESPONSE: The commission recognizes that the injured employee's choice to select a brand name drug over a generic drug will result in an expense to the injured employee and, in some cases, the cost difference between generic and brand name drugs may be significant, which is a factor to be considered by the injured employee when deciding whether to choose the brand name drug. However, the commission disagrees that these rules will not expand the injured employee's access to brand name drugs. Through these rule amendments, the injured employee is now provided with an expanded option to purchase a brand name drug, when the Act and rules did not previously allow this option.

COMMENT: Commenters opposed the rule amendments, asserting that they will lead to increased billing problems due to the current design of current TWCC Form 66a, which only provides a space to show the drug dispensed, when the reimbursement to the provider will be based on the drug prescribed. Commenter recommended a change to TWCC Form 66a that adds a box for the pharmacist to indicate if the prescription is for a generic drug and the injured employee has selected a brand name drug.

RESPONSE: The commission agrees with the need to revise the commission pharmacy billing form. The commission pharmacy billing form will be revised when these amended rules are adopted. The revised form will contain information fields appropriate to the requirements of these amended rules. The revised commission pharmacy billing form will be available on the commission website, www.twcc.state.tx.us, and through the commission Publications Office.

§134.503(b)

COMMENT: Commenters objected to the phrase, "the pharmacist shall dispense," found in §134.503(b)(1), asserting that it indicates the pharmacist has no choice whether or not to participate in the workers' compensation system. Commenters maintain that pharmacists may, in fact, make that choice.

RESPONSE: The commission agrees with commenters' observation that pharmacists may choose whether or not to participate in the Texas workers' compensation system. The commission disagrees, however, that the phrase, "the pharmacist shall dispense," indicates otherwise. Should a pharmacist decline to fill prescriptions for workers' compensation patients who wish to have a brand name drug instead of the prescribed generic drug or over-the-counter alternative, the pharmacist will have no obligation to dispense any drug and would, in that particular instance, decline to participate. There is no prohibition against the pharmacist's exercising this discretion. Therefore, the phrase simply relates to the pharmacist who chooses to dispense the brand name drug when the injured employee so requests--and, thus, chooses to participate in the system.

COMMENT: Commenters objected, generally, to the changes to §134.503(b)(2), stating that the calculations caused by the proposed methodology will cause pharmacies to lose profit margins by dispensing brand name drugs and then collecting the difference and billing for the generic drug.

RESPONSE: The commission acknowledges that the amended rules may potentially affect the pharmacist's profit margin. However, commenters provided no calculations or other evidence to demonstrate to the commission that their profit margins would, in fact, be negatively impacted or the extent to which they would be negatively impacted. On the contrary, at least one commenter cited a $100 difference in cost, on average, between generic and brand name drugs for workers' compensation patients; based on this information, the commission might just as likely conclude that any increased workload or administrative burden the amended rules might impose on the pharmacist will be outweighed by the potential for increased earnings. The commission also recognizes that the legislature, in requiring these rule amendments, has weighed the competing concerns of the pharmacist and the injured employee and has either determined that there will not be a negative impact on the pharmacist such as that described by the commenters or that, on balance, the need of the injured employee to have greater access to brand name drugs outweighs any potential negative impact on the pharmacist.

COMMENT: Commenters opposed the proposed rule amendments because of the cost of software changes that will be necessary to accurately reflect billed versus dispensed drugs under this methodology. Commenter asserted that, in most cases, the time it takes a pharmacy to fill two prescriptions but be reimbursed for only one will be more costly to the pharmacies than the profit margins gained by providing prescription services.

RESPONSE: The commission disagrees in part. The commission acknowledges there may be initial transition costs for some dispensing health care providers to adjust their billing software. However, as stated above, the legislature, in requiring these rule amendments, has weighed the competing concerns of the pharmacist and the injured employee and has either determined that, on balance, the need of the injured employee to have greater access to brand name drugs outweighs any potential negative fiscal impact to the pharmacist associated with the required software changes.

COMMENT: Commenters opposed the amended rules without any modification to the TWCC Form 66a because, they assert, the rules establish a requirement for a pharmacist to dispense one item and bill for another, creating a potential for inaccurate reporting of controlled substance inventories that would be in violation of other regulatory requirements, such as those of the federal Drug Enforcement Agency, the Texas Department of Public Safety, and the Texas Board of Pharmacy; and an appearance of fraudulent activity.

RESPONSE: The commission agrees with the need to revise the commission pharmacy billing form. The commission pharmacy billing form will be revised when these amended rules are adopted. The revised form will contain information fields appropriate to the requirements of the amended rules and other requirements such as DEA policies. The revised commission pharmacy billing form will be available on the commission website, www.twcc.state.tx.us, and through the commission Publications Office.

COMMENT: Commenter opposed the proposed rule because it is not optimal for the injured employee and is unfair to expect the injured employee to pay the cost difference of a brand name drug over the cost of the prescribed generic drug.

RESPONSE: The commission disagrees, to the extent that these amended rules are mandated by §408.028(e) of the Act and HB833. The commission recognizes that in some cases the cost difference between generic and brand name drugs may be significant, which is a factor to be considered by the injured employee when opting to choose the brand name drug. The commission also points out that if the brand name drug is medically necessary, the prescribing health care provider has ability to prescribe the brand name drug as provided in commission §134.502(a)(3).

COMMENT: Commenters expressed various opinions either unrelated or remotely related to these rule amendments. Commenter asserted that if a medical doctor prescribes the medication, then the carrier should be required to accept the medical charge. Commenter opined that generic or brand name drugs or holistic supplements should be the decision of the treating doctor as the system participant most familiar with the injured employee's complete medical picture relating to the injury, and should be paid by the carrier. Commenter stated that it is unfair for the injured employee to have the carrier stop payment on medications.

RESPONSE: These opinions are beyond the scope of these rule amendments and, therefore, will not be addressed.

COMMENT: Commenter recommended adding language to the end of §134.503(b)(2), to provide that when an injured employee chooses to receive a brand name drug, the pharmacist shall " . . . send the carrier the NDC number for the generic drug prescribed and the NDC number for the brand name dispensed." Commenter also recommended that a space be added to the TWCC Form 66a for the pharmacist to report National Drug Codes (NDCs) for both generic and brand name drugs.