Use and Costs of Medical Foods and Convenience-Packaged Drugs in the California Workers’ Compensation System

BACKGROUND: Sales of medical foods (MFs) and convenience packages (CPs) are projected to exceed $2 billion in the United States, with an annual growth rate of 10%. Several studies have highlighted the rapid growth of MF use within the California Workers’ Compensation System (CAWCS). To curb this growth, California implemented Assembly Bill 378 (AB 378) in 2012 to regulate physicians’ incentives to dispense MFs and CPs. AB 378’s regulation on only physician-dispensed MFs and CPs and not pharmacy-dispensed MFs and CPs generated a setting for evaluating the differential effect of the bill on MF and CP use and cost. OBJECTIVES: To (a) examine the use and cost of MFs and CPs in the CAWCS that are not for inborn errors of metabolism and (b) evaluate the regulatory effect of AB 378. METHODS: This study adopted a quantitative approach and employed descriptive statistics and t-tests. The analyses used the most recent complete annual claims data from the Workers’ Compensation Information System dataset to evaluate MF and CP claims frequencies and dollar amounts reimbursed from 2011 to 2013 and to compare the difference between physician-dispensed and pharmacy-dispensed products. RESULTS: Of 151,107 MFs and CPs billed, 95,528 (63.2%) prescriptions were reimbursed. The reimbursed MFs and CPs accounted for approximately $19 million paid to pharmacies and physicians over 3 years. Physician-dispensed MFs, which were regulated by AB 378 in January 2012, experienced a reduction in mean amount reimbursed by $9.95 (P < 0.001)—from $195.64 to $185.68—compared with the mean amount reimbursed in 2011. Conversely, physician-dispensed CPs, as well as pharmacy-dispensed MFs and CPs, did not experience a decrease in mean amount reimbursed. CONCLUSIONS: The results indicated that AB 378 was associated with a statistically significant reduction in physician-dispensed MFs. Concomitantly, the results from t-tests showed no statistically significant difference in mean amount reimbursed for MFs and CPs to pharmacies before and after AB 378. The finding was expected and as hypothesized because AB 378 did not regulate pharmacy-dispensed MFs and CPs. Legislative measures, such as AB 378 in California, may influence rising costs and use of MFs and CPs in general. Other workers’ compensation systems could adopt similar legislation to affect the behavior of physician prescribing of non-inborn errors of metabolism MFs and further test these findings.