Injured Workers Pharmacy v. Steel Creations by and Through Kesa, the Kentucky Workers' Compensation Fund ( 2017 )

RENDERED: AUGUST 24, 2017
TO BE PUBLISHED
~upr:em:e. 415 S.W.3d 631, 632 (Ky. 2013). However, we defer to the CAW
with regard to factual determinations and, when the issues involve mixed
questions of fact and law, we have greater latitude to determine if the
underlying opinion is supported by probative evidence. See Purchase Transp.
Services v. Estate ofWilsori, 39 S.W.3d 816, 817-18 (Ky. 2001).
III. ANALYSIS.
A. The CALJ correctly determined that a pharmacy is a medical
provider.
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KESA argues that workers' compensation claimants are not entitled to
choose a pharmacy because a pharmacy is not a medical provider. The CALJ,
the Board, and the Court of Appeals found to the contrary.
To resolve this issue we must look to two statutory provisions, KRS
342.020(1) and KRS 342.0011(15). KRS 342.020(1) provides that:
In addition to all other compensation provided in this chapter, the
employer shall pay for the cure and relief from the effects of an
injury or occupational disease the medical, surgical, and hospital
treatment, including nursing, medical, and surgical ·supplies and
appliances, as may reasonably be required at the time of the injury
and thereafter during disability, or as may be required for the cure
and treatment of an occupational disease. The employer's
obligation to pay the benefits specified in this section shall
continue for so long as the employee is disabled regardless of the
duration of the employee's income benefits. In the absence of ·
designation of a managed health care system by the employer, the
employee may select medical providers to treat his injury or
occupational disease. Even if the employer has designated a
managed health care system, the injured employee may elect to
continue treating with a physician who provided emergency
medical care or treatment to the employee. The employer, insurer,
or payment obligor acting on behalf of the employer, shall make all
payments for services rendered to an employee directly to the
provider of the services within thirty (30) days of receipt of a
statement for services. The commissioner shall promulgate
'
administrative regulations establishing conditions under which the
thirty (30) day period for payment may be tolled. The proviq.er of
medical services shall submit the statement for services within
forty-five (45) days of the day treatment is initiated and every forty-
five (45) days thereafter, if appropriate, as long as medical services
are rendered. Except as provided in subsection (4) of this section,
in no event shall a medical fee exceed the limitations of an adopted
medical fee schedule or other limitations contained in KRS
342.035, whichever is lower. The commissioner may promulgate
administrative regulations establishing the form and content of a
statement for services and procedures by which disputes relative to
the necessity, effectiveness, frequency, and cost of services may be
resolved.
(Emphasis added.)
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There is no definition of"medical provider" in KRS Chapter 342.
However, KRS 342.0011(15) defines "medical services" as: "medical, surgical,
dental, hospital, nursing, and medical rehabilita_tion services, medicines, and
fittings for artificial or prosthetic devices." (Emphasis added.) As.did the Court
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of Appeals, we hold that the plain meaning of these two statutes is that a
· medical provider is one who provides medical services. Since medicines are
"medical services," and a pharmacist provides that medical service, a
pharmacist is a medical provider. Therefore, absent an employer's
participation in a managed health care system, claimants are free to choose
which pharmacy to use.
We note KESA's argument that such a holding will "open a door through
which other commercial operators ... could pass." However, if that door has
been opened, it is the General Assembly that opened it, not the Court.
Furthermore, to the extent those other commercial operators are subject to the
appropriate fee schedule, we fail to see how KESA would be harmed by a
claimant exercising that choice.
B. The CALJ correctly interpreted the "pharmacy fee schedule."
The workers' compensation "pharmacy fee schedule" is set forth in 803
KAR 25:092. We put that phrase in quotation marks because this fee schedule
is not what we typically think of as a fee schedule. It does not set out specific
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reimbursement rates for medications and it does not adopt any specific
pl)cblished schedule of reimbursement rates. 7 Rather it provides as follows:
Any duly licensed pharmacist dispensing pharmaceuticals .
pursuant to KRS Chapter 342 shall be entitled to be reimbursed in
the amount of the equivalent drug product wholesale price of the
lowest priced therapeutically equivalent drug the dispensing
pharmacist has in stock, at the time of dispensing, plus a five (5)
dollar dispensing fee plus any applicable federal or state tax or
assessment. ·
803 KAR 25:092 § 2. "Wholesale price" is defined as "the average wholesale
price charged by wholesalers at a given time." 803 KAR 25:092 § 1(6).
The CAW interpreted the fee schedule as entitling a pharmacist to
reimbursement based on the average wholesale price the pharmacist paid for a
given medication, plus the dispensing fee. In doing so, the CAW stated that
the regulation neither adopted nor excluded the use of a published average
wholesale price guide to determine the appropriate reimbursement rate. The
Board and the Court of Appeals agreed with the CAW.
KESA agrees with the CAW's interpretation of the regulation. However,
it argues on appeal that the evid~nce compelled a finding that the published
average wholesale price cannot be the basis for determining reimbursement
rates in this case. IWP on the other hand argues that the published average
wholesale price can be used and should be used to determine the
reimbursement rate. We address each argument in turn below.
7 It appears from the evidence that the published and actual average wholesale
prices of pharmaceuticals change frequently, with the published guides being updated
frequently.
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KESA is correct that its expert testified that published average wholesale
prices have little to do with actual wholesale prices. However, neither that
testimony nor the regulation itself compel the finding KESA seeks. We note
that KESA's own witness testified that IWP's prices were in keeping with the
pharmacy fee schedule, testimony the CAW could have chosen to believe.
Furthermore, although M. Joseph claimed that it obtained medication for KESA
at an average of 25% less than the average wholesale price, spreadsheets filed
by KESA show that the M. Joseph and IWP prices for some medications were
the same. Thus, KESA's proof was, at least in part, inconsistent with its
argument. Finally, if the Department of Workers' Claims had wanted to
exclude the use of published average wholesale prices, it could have specifically
stated as much in its regulation.
As to IWP's argument, the regulation does not ·mandate or even suggest
that published average wholesale prices should be used to determine the
appropriate reimbursement rate. Furthermore, IWP's argument to the contrary
notwithstanding, the Commissioner testified that the Department has not
taken the position that a published price controls the reimbursement price.
Therefore, IWP's argument that those guides should be the sole arbiter of
reimbursement rates is without merit.
So, how should pharmacy reimbursement rate disputes be resolved? The
same way all other disputes under KRS 342 are resolved. The parties present
their proof, and the AW makes a determination: The AW may, but is not
· required to, take into consideration the published average wholesale price. The
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ALJ may also take into consideration the wholesale acquisition price, which
has some connection to what a wholesaler would charge a retailer. However,
unless the ALJ determines that the published average wholesale price or the .
wholesale acquisition price is the _actual average wholesale price the
pharmacist paid, the ALJ may not simply adopt either of those pricing guides
in toto.s The ALJ must determine the actual wholesale price the pharmacist
paid, which may or may not have a relevant correlation to either the published
average wholesale price or the wholesale acquisition price. Regardless, the
AW, by exercising the discretion granted to him or her, must determine what
the appropi:iate reimbursement rate is under the regulation.
We recognize that this could, as lWP argues, put a considerable strain on
the already busy AWs. That may or may not be the case. However, if that
occurs, the Department can take the appropriate steps to remedy the situation
by amending the regulation.
As to this case, the CALJ did not order KESA to reimburse IWP based on
the published average wholesale price that IWP charged. He ordered KESA to
reimburse IWP pursuant to the statute and regulations, which he correctly
interpreted to be the actual average wholesale price IWP paid. However, the
a For the sake of clarity, we are not stating that any of the pricing guides are per
se admissible. Any such guide must be admissible pursuant to 803 KAR 25:010
Section 14, and the AW is free to exercise his or her discretion in either admitting or
excluding a proffered pricing guide within the confines of that regulation. Based on
the record before us in this case, it appears that the published average wholesale price
guides and the wholesale acquisition price guide may not be particuiarly relevant. ·
However, none of the parties have sought to introduce into evidence any of those
pricing guides. If a party attempts to do so and there is an objection, the AW must
undertake the appropriate analysis before admitting or excluding any proffered pricing
guides.
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CAW did not make any specific findings regarding the actual average wholesale
price IWP paid for the medications it dispensed.
KESA's argument that its payment to IWP based on the M. Joseph
agreement satisfies the regulation is without merit. As we understand this
argument, KESA believes that the pharmacy benefit management companies
with which it has contractual relationships have established the average
wholesale price through their contracts with the pharmacies. Thus, by paying
IWP the M. Joseph price, KESA is paying the actual average wholesale price.
However, the regulation states that reimbursement is based on what the
dispensing pharmacy (IWP) paid for medications, not what another dispensing
pharmacy (Walgreens, Kroger, Meijer, etc.) may have paid. Therefore, this
matter must be remanded to the Department for assignment to an AW with
instructions to make findings regarding what IWP's actual average wholesale
price was for the medications at issue.
Finally, we note that 803 KAR 25:092 § 3(4) provides that "[a]ny
insurance carrier, self-insured employer or group self-insured employer may
enter into an agreement with any pharmacy to provide reimbursement at a
lower amount than that required in this administrative_regulation." Thus,
there is no prohibition against the arrangement KESA has with M. Joseph and
there would be no prohibition against KESA entering into a similar
. arrangement with IWP. However, KESA cannot unilaterally impose its M.
Joseph agreement on IWP.
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C. The CALJ correctly found that KESA is not liable for interest on any
past due amounts it owes IWP.
On remand, the AW may find that KESA does not owe IWP any
additional sums. However, because the AW could find otherwise, the issue of
interest on past due benefits may arise. Therefore, we address it.
"It is fundamental that administrative agencies are creatures of statute
and must find within the statute warrant for the exercise of any authority
which they claim." Dept. for Nat. Res. and Envtl. Prat. v. Stearns Coal & Lumber
Co., 563 S.W.2d 471, 473 (Ky. 1978). KRS 342.040 provides for the
assessment of interest on past due income benefits; however, there is no
corollary for payment of interest on past due medical expense benefits. We
presume that the General Assembly acted intentionally when it provided for the
payment of interest on past due income benefits while omitting the payment of
interest from past due medical expense benefits. See Tomer v. Nelson, 342
S.W.3d 866, 873 (Ky. 2011). Therefore, we agree with the CAW, the Board,
and the Court of Appeals that IWP is not entitled to any interest on any past
due payments.
D. The Board correctly reversed the CALJ's assessment of costs.
The CAW found that the Attorney General's opinion did not provide a
reasonable legal or factual basis for KESA's decision to direct the named
claimants to use the M. Joseph program to obtain their medications. In doing
so, the CAW noted that the Attorney General's opinion: (1) stated that the
claimants did not have the right to choose their pharmacy, but it did not state
that KESA had the right to make that ·choice; (2) was based in part on the
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incorrect assertion that physicians were directing their patients to IWP; and (3)
ran counter to a Board opinion. Based primarily on the preceding findings, the
CAW ordered KESA to pay the entire cost of the proceedings. The Board found
that the Attorney General's opinion was sufficient to support KESA's actions.
The Court of Appeals agreed with the Board. We agree with the ultimate
decisions by the Board and the Court of Appeals but for somewhat different
reasons.
KRS 342.310 provides, in pertinent part, that an AW "may assess the
whole cost of the proceedings" if he determini,s that the proceedings were
"brought, prosecuted, or defended without reasonable ground." Whether to
assess such cost is within the AW's discretion. Richey v. Perry Arnold, Inc.,
391 S.W.3d 705, 713 (Ky. 2012).
If the only issue before the CAW was whether KESA could direct the
claimants to use KESA approved pharmacies, we might be convinced that the
Board and the Court of Appeals overstepped their bounds. It was within the
CAW's discretion to find that the opinion of the Attorney General was not a
sufficient basis to support KESA's action, particularly in the face of a Board
opinion to the contrary. However, as the litigation progressed, the
interpretation of KAR 25:092 became an issue as did the appropriateness of
IWP's charges·. This was an issue of first impression, which KESA had a
reasonable legal and· factual basis to challenge. Because the CAW did not
factor this issue into his decision to assess costs, he abused his discretion.
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Therefore, we affirm the Court of Appeals and the Board in their reversal of the
CAW's assessment of the cost of the proceedings against KESA.
IV. CONCLUSION.
For the foregoing reasons, we affirm the Court of Appeals opinion
regarding the assessment of interest and sanctions. We also affirm the Court
of Appeals that a pharmacy is a medical provider. However, we vacate the
remainder of the Court of Appeals opinion and remand because the CAW did
not make a determination regarding the actual average wholesale price paid by
_IWP. On remand, the AW, or CAW if appropriate, must determine what IWP's
actual average wholesale price was for the contested medications. The AW, or
CAW if appropriate, may reopen proof if he or she deems it necessary to do so.
Minton, C.J.; Cunningham, Hughes, Keller, Venters, JJ., and Special
Justices David Samford and Kimberly McCann, sitting. All concur. VanMeter
and Wright, JJ., not sitting.
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COUNSEL FOR APPELLANTS/CROSS-APPELLEES, STEEL CREATIONS, BY
AND THROUGH KESA, THE KENTl!CKY WORKERS' COMPENSATION FUND;
MURRAY ELECTRONICS, BY AND THROUGH KESA, THE KENTUCKY
WORKERS' COMPENSATION FUND; FAMILY ALLERGY AND ASTHMA, BY AND
THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; AND
SAMARITAN ALLIANCE, BY AND THROUGH KESA, THE KENTUCKY
WORKERS' COMPENSATION FUND:
Joseph L. Ardery
Griffin Terry Sumner
Frost Brown Todd, LLC
\
James Gordon Fogle
Fogle Keller Purdy, PLLC
COUNSEL FOR APPELLANT/ CROSS-APPELLEE, PRESTON HIGHWAY
METERED CONCRETE, BY AND THOUGH KESA, THE KENTUCKY WORKERS'
COMPENSATION FUND: .
Joseph L. Ardery
Griffin Terry Sumner
Frost Brown Tcidd, LLC
James Gordon Fogle
Fogle Keller Purdy, PLLC
Natalie Laszkowski
Fulton & Devlin, LLC
COUNSEL FOR APPELLEE/CROSS-APPELLANT, INJURED WORKERS'
PHARMACY:
Charles E. Jennings
Eric M. Lamb
Lamb & Lamb, PSC
COUNSEL FOR APPELLEES/CROSS-APPELLANTS, KEVIN KERCH AND
DONALD GRAMMER:
Charles E. Jennings
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COUNSEL FOR APPELLEE/CROSS-APPELLANT, KEM BARNES:
Jeffery Roberts
Roberts Law Office
COUNSEL FOR APPELLEE/CROSS-APPELLEE, RITA MERRICK:
McKinnley Morgan
Morgan Collins & Yeast
COUNSEL FOR APPELLEE/CROSS-APPELLEE, SHAUNA LITTLE F /K/ A
HARDIN:
Paul Guthrie
COUNSEL FOR APPELLEE/CROSS-APPELLEE, JACK CONWAY, ATTORNEY
GENERAL:
Andy Beshear
Attorney General of Kentucky
James Robert Carpenter
Assistant Attorney General
COUNSEL FOR AMICUS CURIAE, INSURANCE INSTITUTE OF KENTUCKY:
Kenneth J. Dietz
Lucas & Dietz, PLLC
COUNSEL FOR AMICUS CURIAE, KENTUCKY ASSOCIATION OF GENERAL
CONTRACTORS:
Gregory Lonzo Little
Ferreri Partners PLLC
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