Reporting from Sacramento — An unusual coalition of corporations, insurance companies and labor groups is pushing for legislation that would put restrictions on the customized medicines known as compounded drugs, saying the prescribing of these drugs has become rife with abuse.
Compounded drugs are medications whose ingredients have been tailored to meet a patient's individual needs. Proponents say they improve treatment, but critics say they are typically made with many of the same ingredients found in over-the-counter pills and generic prescription drugs and simply boost profits for doctors and pharmacies.
Proposed legislation by state Sen. Mark DeSaulnier (D- Concord), former chairman of the Senate Labor Committee, and Assemblyman Jose Solorio (D- Santa Ana), chairman of the Assembly Insurance Committee, would limit prices of medically necessary compounded drugs by adding them to the government's fee schedule.
"This is one we're getting out ahead of early," said Jason Schmelzer, a lobbyist for the California Coalition on Workers' Comp, which includes Walt Disney Co., Marriott International Inc., Costco Wholesale Corp. and more than 200 other employers in the public and private sectors.
And labor is siding with business on this fight. The bill is needed "to make sure that bottom-feeders and cheaters of the system aren't rewarded," said Angie Wei, a Sacramento advocate for the California Labor Federation.
"When people excessively profit from the system, it oftentimes comes out of the hide of injured workers," Wei said.
Critics of the use of compounded drugs point to a sharp rise in the bills submitted to the State Compensation Insurance Fund, the state's biggest workers' comp insurer. Billings for compounded drugs reached $28 million, or 24% of the fund's total prescription billings last year — from a number so low the previous year that State Fund didn't bother to track it.
"There's no doubt about it that there are people gaming the system," said John Duncan, director of the California Department of Industrial Relations. "The fine line in this, of course, is to identify where legitimate medicine is being applied and abuse is beginning."
Beyond a rise in billings, however, neither state nor insurance industry officials could point to systematic evidence of widespread abuse. The state Legislature has, however, asked the state Commission on Health and Safety and Workers' Compensation to examine the issue.
Rand Corp. in Santa Monica is helping with the research, and a report on the use of compounded drugs is expected to be released early next month.
Doctors who prescribe and hand out such compounded painkillers and analgesic salves as KetoLido and Lidorub said their patients need them.
By removing certain nonessential elements or turning pills into ointments and salves, pharmacists can develop medicines that, for instance, avert drowsiness, allergic reactions, problems with swallowing pills or damage to the kidney or liver.
"The good thing about compounding is it's individualized for patients," said Hootan Melamed, a pharmacist at New Age Pharmaceuticals in West Los Angeles.
Doctors and pharmacists latch onto that point as a key reason they should be allowed to charge higher prices. Dr. Lee Snook, a Sacramento pain specialist and chairman of the California Medical Assn.'s technical advisory committee, said doctors should be able to get "reasonable compensation for reasonable services."
But higher prices have turned into huge mark-ups, catching the attention of government authorities, according to one person interviewed by California investigators. State and federal officials declined to comment.
One bill that a doctor submitted last month to an insurer sought $1,058 for a prescription compound containing Ketoprofen powder, a non-opiate pain medicine, said the person, who spoke on condition of anonymity because the bill could become part of a confidential state investigation.
The insurer paid the physician $36, the value listed for the active ingredient on the state pharmaceutical reimbursement schedule, the person said. A similar, 30-day supply of Ketoprofen powder in prescription capsule form sells for $15.79 at Costco pharmacies.
At Employers Compensation Insurance Co., compounded drugs soared to 44% of all prescription claims last year from 9.6% the previous year, said Jim Werbeckes, a vice president at the Reno firm, which also is licensed in California.
"This is one of our big issues to get this under control," he said. "It's something I think you're going to see across the country eventually if we don't get a handle on it."
A recent effort to discourage the use of compounded drugs — especially those concocted by pharmacists, given free by doctors to their patients and billed to insurers — failed to get through the state Legislature.
