DECISION AND ORDER

EZ Rx Pharmacy (Petitioner) appealed the decision and order of the Texas Workers’ Compensation Commission’s (Commission) Medical Review Division (MRD) in MDR Docket No. M4-02-0609-01. The MRD decision found Petitioner’s billed rate of reimbursement should be reduced and ordered the University of Texas System (Carrier) to pay $293.40, instead of the $849.90 claimed by Petitioner, for the prescription drug Vanadom, which Petitioner dispensed to a workers’ compensation claimant (Claimant) on six occasions. This decision finds Petitioner is entitled to reimbursement in the amount of $844.

I. JURISDICTION, NOTICE, AND PROCEDURAL HISTORY

There were no contested issues of jurisdiction, notice or venue. Therefore, those issues are addressed in the findings of fact and conclusions of law without further discussion here.

The hearing in this matter convened and closed on September 17, 2002, at the State Office of Administrative Hearings, 300 W. 15^th Street, Austin, Texas, with Administrative Law Judge (ALJ) Ann Landeros presiding. Petitioner was represented by its designated representative, Nicky Otts. Carrier was represented by Assistant Attorney General Kevin Heyburn. The Commission did not participate in the hearing. The record closed that same date.

II. DISCUSSION

A. Background Facts

On_______, Claimant injured her back, an injury compensable under the Texas Workers’ Compensation Act (Act). At the time of the compensable injury, Carrier was responsible for Claimant’s workers’ compensation insurance coverage.

In June 2001, Claimant’s treating doctor, Jerjalis J. Denno, M.D., prescribed Vanadom, which he described as a “generic of Soma, a skeletal muscle relaxant . . .used for relief of the discomfort associated with acute, painful musculoskeletal conditions.” (Exh. 1, p. 15). Vanadom and Soma are brand names for the generic drug carisoprodol.

Petitioner filled Claimant’s prescription on six occasions between June 4 and July 16, 2001. On each occasion, Petitioner billed the prescription, each of which was for 50 tablets of Vanadom, in the amount of $141.65. In denying Petitioner’s request for reimbursement, Carrier’s EOB listed denial code AF, which it defined as “Fee Guidelines MAR Reduction.” At the MRD, Carrier claimed Petitioner’s failure to comply with the Commission’s Pharmaceutical Fee Guideline meant no reimbursement should be paid. Carrier’s EOB did not dispute the medical necessity of prescribing a non-generic drug.

The MRD ruled that, because Vanadom was not listed on the accepted substitute for the Commission’s approved formulary in June or July 2001, reimbursement should be at the generic rate for carisoprodol. Reimbursement of $293.40 was ordered, and Petitioner timely appealed the MRD order.

Legal Standards

Petitioner has the burden of proving the case by a preponderance of the evidence, pursuant to 28 TEX. ADMIN. CODE (TAC) § 148.21(h) and (i); 1 TAC § 155.41. Pursuant to the Act, an employee who has sustained a compensable injury is entitled to all health care reasonably required by the nature of the injury as and when needed. The employee is specifically entitled to health care that cures or relieves the effects naturally resulting from the compensable injury, promotes recovery, or enhances the ability of the employee to return to or retain employment. TEX. LAB. CODE ANN. § 408.021(a).

Health care includes all reasonable and necessary medical services, including a medical appliance or supply. TEX. LAB. CODE ANN. §401.011(19)(A). A medical benefit is a payment for health care reasonably required by the nature of the compensable injury. TEX. LAB. CODE ANN. § 401.011(31).

Section I.A. of the Commission’s 1996 Pharmaceutical Fee Guideline (PFG) stated reimbursement was to be the lesser of the provider’s usual and customary charge for the same or similar service or the fees established by the formulas for brand-name and generic pharmaceuticals as described in Section (II) (A).^[1]

Section (II)(A) of the PFG gave the formula for computing fair and reasonable fees as:

a) Brand Name Pharmaceuticals. Average Wholesale Price (AWP)/unit x number of units x 1.09 + $4.00 = MAR

b) Generic Pharmaceuticals. Average Wholesale Price (AWP)/unit x number of units x 1.38 + $7.50 = MAR

Section (II)(B) of the PFG stated: “The AWP shall be determined utilizing the monthly publication of Medispan that is in effect on the date of service.”

Evidence

In June and July 2001, Petitioner filled six 50-tablet prescriptions of Vanadom for Claimant. Petitioner billed Carrier in $141.65 for each prescription. The MRD’s decision and order set reimbursement based on the AWP for Vanadom’s generic, carisoprodol.

Petitioner presented the affidavit of Odes Mitchell, the president of GM Drugs, which manufacturer Vanadom. (Exh. 2). Mr. Mitchell explained that Medispan ceased publication in mid-1999. The company which bought Medispan replaced the AWP-listing publications with a new publication called PriceAlert. To have its named drug listed in PriceAlert, a company had to either pay a listing fee or the named drug had to have a certain sales volume. During the period in question, GM declined to pay the listing fee and Vanadom’s sales volume did not meet PriceAlert’s threshold amount for listing.

Carrier’s witness, registered nurse Joyce Maxum, testified that after Medispan ceased publication, PriceAlert became the source for determining AWP for drugs. She did not think there was any medical necessity for prescribing a brand name drug instead of the generic carisoprodol. She discounted Dr. Denno’s August 2001 letter in which he stated he had prescribed Vanadom and described Vanadom as a “generic of Soma.” She found that letter somehow unreliable because it was written after Carrier’s denials of reimbursement. Ms. Maxum emphasized that in January 2001, Dr. Denno’s office note for Claimant stated he had prescribed Soma. (Exh. 1, p. 43). Soma is the brand name for carisoprodol. During the period in question, carisoprodol had an AWP of $.59 per tablet, according to Ms. Maxum. She stated there were many “generics” of Soma that cost less that Vanadom during this period. Because Vanadom was not listed in PriceAlert, Ms. Maxum thought no reimbursement was due for the prescriptions provided Claimant.

Mr. Mitchell testified that the AWP for Vanadom during the period in question was $250.73 per 100 tablets. In the last issue of Medispan, the AWP for Vanadom was $192.39 and the AWP for Soma was $2.52. (Exh. 4). According to Ms. Maxum, in the June 15, 2001, PriceAlert, the AWP of Soma was $3.40 per tablet. (Exh. 1, p. 42). She stated that the August 2001 PriceAlert did list the AWP for Vanadom, which was $2.74 per tablet.

D. Analysis

Except for Claimant’s identity, this is virtually the same dispute that was the subject of the decision and order in SOAH Docket No. 453-02-1896.M5, issued September 30, 2002. In that case, ALJ Casey Church declined to apply Carrier’s argument that the demise of the Medispan publications meant no reimbursement was due because there was no authorized publication from which to derive the AWP. After rejecting that argument, Judge Church wrote:

. . . the rule provisions authorizing payment for drugs at the provider’s “usual and customary charge,” and the section setting forth the purpose of the MAR being a presumptively fair and reasonable price, give a provider an opportunity to show that amounts he billed are appropriate. What changed in 2001 was erasing the agreed means of deriving an MAR for drugs that would be treated as presumptively fair and reasonable. Rather, a provider after the third quarter of 1999 had to shoulder the entire burden to show his charges were fair and reasonable, within the meaning of 28 TAC §42.115(a)(1). . . The standard computation formula of the PFG for brand-name drugs should be applied . . .

The Commission’s rule in effect at all times relevant to this case recognized Medispan, not PriceAlert, as the price formulary for determining the AWP. Ms. Maxum’s reliance on PriceAlert as the definitive arbiter of drugs for which reimbursement was approved was misplaced as PriceAlert was never recognized as such in the Commission’s rules. Pursuant to the rule in effect at that time, Vanadom’s exclusion from PriceAlert in June and July 2001 was irrelevant. Vanadom’s inclusion in the August 2001 edition of PriceAlert undermined Ms. Maxum’s argument that Vanadom was not an approved drug.

Dr. Denno prescribed Soma at one point and Vanadom at one point. There is no evidence he ever prescribed carisoprodol for Claimant in its strictly generic form, so reimbursement at the generic rate is not appropriate in this case. Medical necessity is not an issue in this case because Carrier did not raise the issue in its EOB or at the MRD.

The evidence in this case showed, that of the two categories recognized in the PFG, Vanadom is more like a brand-name than a generic drug. Both parties recognized it as such. The evidence established that the AWP for Vanadom was $2.51 per tablet during June and July 2001. In August 2001, PriceAlert listed Vanadom’s AWP as $2.74. The AWP for Soma in June 2001 was $3.40. Based on these price ranges, $2.51 was a fair and reasonable price for Vanadom during this period. Therefore, applying the PFG formula for calculating reimbursement for brand name drugs, each of Claimant’s prescriptions for Vanadom should be reimbursed in the amount of $9 ($2.51-AWP per tablet x 1.09’ $2.73-per tablet cost x 50-size of prescription + $4). Claimant had six prescriptions of Vanadom filled, bringing the total amount of reimbursement due in this case to $844.77.

Petitioner met its burden to show that reimbursement of $844.77 was fair and reasonable for the six prescriptions of Vanadom provided Claimant in June and July 2001. Carrier should reimburse Petitioner in that amount.

III. FINDINGS OF FACT

1. On_____, Claimant injured her back, an injury compensable under the Texas Workers’ Compensation Act (Act).
2. At the time of the compensable injury, University of Texas Systems (Carrier) was responsible for Claimant’s workers’ compensation insurance coverage.
3. Claimant’s treating doctor, Jerjis Denno, M.D., prescribed Vanadom, a brand-generic of the drug Soma, for her compensable injury.
4. In June and July 2001, EZ Rx Pharmacy (Petitioner) filled six 50-tablet prescriptions of Vanadom for Claimant.
5. Petitioner billed Carrier $141.65 for each of Claimant’s prescriptions.
6. After Carrier denied Petitioner’s claim for reimbursement, Petitioner appealed the denial to the Commission’s Medical Review Division (MRD).
7. The MRD decision and order granted Petitioner reimbursement but only in the amount of $293.40 and Petitioner timely appealed the MRD decision and order.
8. Pursuant to the notice of hearing sent by Commission’s Staff, Petitioner and Carrier appeared and were represented at the hearing held September 17, 2002.
9. In June and July 2001, the Commission’s rules recognized the drug price formulary Medispan as the definitive source for establishing a drug’s average wholesale price (AWP) for purposes of calculating the reimbursement rate for prescriptions.
10. In June and July 2001, the Commission did not recognize PriceAlert, Medispan’s successor publication, as a drug price formulary for AWP of drugs.
11. In June and July 2001, Vanadom’s AWP was $2.51 per tablet.
12. In August 2001, PriceAlert listed Vanadom’s AWP as $2.74.
13. In June 2001, Soma’s AWP was $3.40 per tablet.
14. In June and July 2001, a fair and reasonable AWP for Vanadom was $2.51 per tablet.

IV. CONCLUSIONS OF LAW

1. The Texas Workers’ Compensation Commission (Commission) has jurisdiction related to this matter pursuant to the Texas Workers’ Compensation Act (Act), TEX. LABOR CODE ANN. §413.031.
2. The State Office of Administrative Hearings has jurisdiction over matters related to the hearing in this proceeding, including the authority to issue a decision and order, pursuant to § 413.031(d) of the Act and TEX. GOV’T CODE ANN. ch. 2003.
3. The hearing was conducted pursuant to the Administrative Procedure Act, TEX. GOV’T CODE ANN. ch. 2001 and the Commission’s rules, 28 TEX. ADMIN. CODE (TAC) § 133.305(g).
4. Adequate and timely notice of the hearing was provided in accordance with TEX. GOV’T CODE ANN§§ 2001.051 and 2001.052.
5. Petitioner had the burden of proof in this proceeding. 28 TAC §§148.21(h) and (i); 1 TAC§ 155.41.
6. Pursuant to the Act, an employee who has sustained a compensable injury is entitled to all health care reasonably required by the nature of the injury as and when needed. The employee is specifically entitled to health care that cures or relieves the effects naturally resulting from the compensable injury, promotes recovery, or enhances the ability of the employee to return to or retain employment. TEX. LAB. CODE ANN. §408.021(a).
7. Health care includes all reasonable and necessary medical services, including a medical appliance or supply. TEX. LAB. CODE ANN. §401.011(19)(A). A medical benefit is a payment for health care reasonably required by the nature of the compensable injury. TEX. LAB. CODE ANN. § 401.011(31).
8. Section (I)(A) of the Commission’s 1996 Pharmaceutical Fee Guideline (PFG) stated reimbursement was to be the lesser of the provider’s usual and customary charge for the same or similar service or the fees established by the formulas for brand-name and generic pharmaceuticals as described in Section (II)(A).
9. Section (II)(A) of the PFG gave the formula for computing fair and reasonable fees as:
10. a)Brand Name Pharmaceuticals. Average Wholesale Price (AWP)/unit x number of units x 1.09 + $4.00 = MAR
11. a)Generic Pharmaceuticals. Average Wholesale Price (AWP)/unit x number of units x 1.38 + $7.50 = MAR
12. Section (II)(B) of the PFG stated: The AWP shall be determined utilizing the monthly publication of Medispan that is in effect on the date of service.
13. In June and July 2001, a fair and reasonable reimbursement rate for a 50-tablet prescription of Vanadom was $140.79.
14. A fair and reasonable rate of reimbursement for Claimant’s six Vanadom prescriptions was $844.77.

ORDER

It is ORDERED that University of Texas Systems reimburse EZ Rx Pharmacy the amount of $844.77 for Claimant’s six Vanadom prescriptions.

Signed the 24^th day of October, 2002.

ANN LANDEROS
Administrative Law Judge
STATE OFFICE OF ADMINISTRATIVE HEARINGS

1. The current version of this rule is found at 28 TAC § 42.115.↑