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DEA Classification Change for Hydrocodone Combination Products (HCPs)

By , September 15, 2014 10:27 am

When the Controlled Substances Act was passed in 1970, pure hydrocodone was classified as Schedule II, while its combination products, HCPs, (those containing hydrocodone as well as specific amounts of other medications such as acetaminophen or ibuprofen) were classified as Schedule III.  On Friday, August 22, 2014, the DEA published a final rule in the Federal Register moving hydrocodone combination products (HCPs) from Schedule III classification to the more restrictive Schedule II.

Controlled Substances are classified into “schedules,” Schedule I drugs are considered highly addictive with no medical purpose; Schedule II are those substances noted to have a medical purpose that have a greater potential for abuse and harm. This final rule imposes all regulatory sanctions and controls regarding a Schedule II medication on all those who handle (manufacture, distribute, dispense, prescribe, etc) HCPs and will go into effect October 6th, 2014.

How will this rescheduling of HCPs affect the worker’s compensation industry and ultimately Medicare Set Asides?

HCPs are among the top prescribed drugs within the workers’ compensation industry. The combination of the additional analgesic, such as acetaminophen, with the hydrocodone has been found to give additive analgesia as compared to the same doses of either agent alone; therefore, making the HCPs more popular for utilization for the treatment of moderate to moderately-severe pain. Some of the most common brand names for these combination medications are Norco, Vicodin and Lortab(Hydrocodone/Acetaminophen) along with Vicoprofen (Hydrocodone/Ibuprofen).

This reclassification will place more stringent requirements on the handling of HCPs. For the manufacturers as well as pharmacies this means changes must be implemented in the areas of distribution, dispensing, record keeping and storage.  These changes will lead to increased costs for those handling the HCPs which will more than likely lead to an increase in AWP (average wholesale price) as well as the price at time of dispensing.   We may also see a trend away from utilization of the HCPs which are relatively inexpensive to more costly brand name and generic medications in a less restrictive scheduled classification or even to a more expensive long acting hydrocodone such as the newly released Zohydro ER. This would lead to higher prescription costs within the workers’ compensation claim and ultimately the prescription allocation within MSAs.

The new requirements for HCPs as Schedule II medications will also set limitations on prescribing. Schedule II medications must be hand written and may not be faxed (the exception being for Hospice) or called into pharmacies thus making it more difficult for a claimant to obtain their medication. Many states will allow only a one month prescription to be written per visit while a few will allow up to a 90 day supply. Previously when under the schedule III classification, the prescriptions for HCPs were valid for up to 6 months.  This will increase the number of office visits required, along with the expense of transportation if provided for claimant, as well as utilization of an interpreter when necessary, all of which will increase the medical cost incurred for the claimant to obtain the prescription for his or her HCP. This in turn will also increase the cost within the claim and ultimately the medical allocation within MSAs.

It remains to be seen how much the reclassification of HCPs to a schedule II will impact the treatment of pain management within the workers’ compensation industry.  However, it just as important to see whether it will indeed reduce the abuse, diversion and addiction issues that prompted the DEA to adjust its classification in the first place.

Helios Settlement Solutions will continue to keep you informed concerning the HCPs and any other changes that will affect prescription drug costs within the claims and ultimately MSAs.


CMS Issues Alert Regarding Change in Reporting SSNs/HICNs Pursuant to the SMART Act

By , September 11, 2014 2:59 pm

Just yesterday, September 10, 2014, CMS issued an alert which modifies the requirements relating to the reporting of HICNs and SSNs by NGHP RREs. The alert can be found here.

Pursuant to the SMART Act, CMS was required to do the following: “not later than 18 months after the date of enactment of this bill, the Secretary of HHS shall permit but not require to access or report the beneficiary’s social security account numbers or health identification claim numbers.”

As a result, CMS has issued this alert which provides that effective January 5, 2015, where an NGHP RRE cannot obtain an individual’s HICN or full SSN, RREs may report the following data elements that will enable CMS to properly identify a Medicare beneficiary: 1) last five digits of SSN, 2) first initial, 3) surname, 4) date of birth, and 5) gender.

If NGHP RREs are unable to obtain or do not provide the HICN, full SSN, or any of the above listed data elements, they must document their attempts to obtain this information (RREs may use the model language provided by CMS located in the Downloads section of the MIR for NGHP page at

CMS states within the alert that a subsequent alert will be published prior to the January 5, 2015 implementation, which will include additional instructions for entry of the partial SSN into the Claim Input File or Query Input File.

While Helios Settlement Solutions applauds CMS for taking action on this requirement of the SMART Act, some questions remain:

1) Within the alert, CMS states that they currently highly recommend, but do not require, that NGHP RREs submit the HICN or full SSN as part of their reports. However, CMS does currently require the HICN/full SSN to obtain a match in their system when reporting, so this statement seems to contradict current requirements. We assume that this is a scrivener error and that CMS meant to say that full SSNs/HICNs will be recommended but not required come January 5, 2015.

2) While it is helpful that an RRE will no longer have to obtain a full SSN come January 5, 2015, it is unclear that if a claimant is unwilling to provide a full SSN, whether they would then be willing to still provide the last 5 digits of the SSN. On a good note, however, and as mentioned above, if the RRE still cannot obtain the last 5 digits of the SSN, the RRE can document its attempts to obtain this information.

Helios will keep our subscribers updated on any additional developments. For questions, please contact


After Reimbursing Conditional Payment Amount to Medicare, Workers’ Compensation Carrier Still Held Liable Under MSP Private Cause of Action

By , September 11, 2014 8:52 am

A recent case out of the United States District Court for the Western District of Kentucky, Estate of McDonald v. Indemnity Insurance Co., 2014 U.S. Dist. LEXIS 121902 (September 2, 2014), has set a new precedent for the use of the private cause of action under the Medicare Secondary Payer Act (MSP): a primary payer can be held liable for double damages despite the fact that it has already reimbursed Medicare.

The private cause of action within the MSP, which is located at 42 U.S.C. § 1395y(b)(3(A), states: “[t]here is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).”

This ambiguous provision of the MSP has been subject to interpretation in recent case law, due to the fact that the actual provision does not specify who may bring the private cause of action (the beneficiary, provider, Medicare)  and who it may be brought against (group health plans, non-group health plans, or both). Two cases in particular are worth highlighting prior to discussing McDonald.

1)     In Bio-Medical Applications of Tennessee, Inc. v. Central States Southeast and Southwest Areas Health and Welfare Fund, 656 F.3d 277 (6th Cir. 2011), a healthcare provider prevailed on a private cause of action under the MSP against a group health plan where it terminated a beneficiary’s coverage due to her Medicare entitlement (which induced Medicare to make conditional payments).

2)     Additionally, in Brain Surgeons, PLLC v. State Farm Mutual Automobile Insurance Co., 2014 WL 3440644 (6th Cir. July 16, 2014), a provider successfully prevailed on a private cause of action against a non-group health plan where the non-group health plan, a no-fault provider, denied coverage due to a purported pre-existing condition, which then prompted the provider to submit its bills to Medicare instead.

In McDonald, Clinton McDonald (“claimant”) was injured in a motor vehicle accident while in the course and scope of his employment. He suffered injuries as a result of the accident, and shortly thereafter passed away. Prior to his death, Medicare had paid $180,185.75 in medical bills to treat claimant between the accident and his death. Although the workers’ compensation carrier, Indemnity Insurance Company (“carrier”) initially disputed that claimant’s death was caused by the work related accident, the workers’ compensation board ordered carrier to pay for claimant’s medical expenses.

Subsequently, claimant’s Estate filed a lawsuit against carrier alleging that due to the fact that carrier had failed to reimburse Medicare for the medical expenses of claimant that Medicare had paid, the Estate was entitled to a double recovery of that sum under the private cause of action provision of the MSP. After the Estate filed its complaint, carrier received a conditional payment letter from Medicare stating that Medicare had made $181,326.38 in conditional payments for claimant’s healthcare. The conditional payment letter specifically stated within it that the carrier should “refrain from sending any monies to Medicare prior to submission of settlement information and receipt of a demand/recovery calculation letter from Medicare’s office, so as to eliminate underpayments, overpayments, and/or associated delays.”

Shortly thereafter, carrier received a “final demand letter” from Medicare asking that  carrier pay $184, 514.24 and that interest would be assessed on the amount if it was not fully resolved within 60 days of the date of the letter. Carrier then issued a check to Medicare for the $184, 514.24, and Medicare acknowledged receipt of the check and stated that the amount due had been reduced to zero.

The carrier then filed a motion to dismiss the Estate’s complaint with the understanding that the Estate’s lawsuit should no longer be a viable claim since Medicare’s conditional payment claims had been satisfied. The Estate contended that the carrier’s motion to dismiss should be denied, due to the fact that its complaint spurred the carrier to pay Medicare, and that its lawsuit accomplished what the MSP private cause of action was meant to accomplish: essentially that an errant workers’ compensation carrier has now paid Medicare what it owed Medicare for the past two years. Even though the carrier initially disputed that it was liable, once the workers’ compensation board concluded that claimant’s death was caused by the accident and that carrier was responsible to pay claimant’s medical expenses, carrier did not notify or seek to reimburse Medicare. Carrier did reimburse Medicare in full within sixty days of its receipt of Medicare’s request for payment; however, this occurred only after the Estate filed this lawsuit.

The court analyzed both Bio-Medical and Brain Surgeons, although neither case was exactly on point, in coming to its conclusion that the Estate would prevail on its private cause of action against carrier for double damages. It determined that the purpose of the private cause of action is to encourage beneficiaries to bring claims even if Medicare has already paid the beneficiaries’ expenses. Once a private cause of action claim has been lodged against a defendant, a defendant cannot escape the double damages provided for in that provision by paying single damages to Medicare. Additionally, carrier’s “no harm; no foul” argument disregards the two years between the order for this payment by carrier and the filing of this suit during which carrier did nothing to notify or reimburse Medicare. Therefore, as the Estate’s filing of the suit prompted payment in the amount of $184, 514.24, the Estate is entitled to the double damage in that amount to reward the Estate for its efforts.

This case should not be taken lightly. Although McDonald technically only applies in the sixth circuit, we now have a case where a beneficiary has been allowed to prevail on a double damages private cause of action claim against a workers’ compensation carrier, despite the fact that it had already paid Medicare and had done so within 60 days of Medicare issuing its final demand, prior to interest even accruing.

Traditionally, it has not been recommended to reimburse Medicare prior to Medicare issuing its final demand, but perhaps it is time to revise that recommendation based upon McDonald. Because this case will likely set a precedent for other jurisdictions, it would be wise for payers to become more proactive verify if any conditional payments are owed to Medicare immediately upon learning that a claimant is a Medicare beneficiary. Treading water and waiting for Medicare to issue a demand for payment is what caused the carrier in this case to be punished with double damages.

Helios Settlement Solutions encourages you to contact us to discuss any impact this case may have on your conditional payment handling. For questions, please contact


CMS to Launch Functionality in WCMSAP Which Allows for Direct Input of Prescription Drugs

By , August 25, 2014 12:43 pm

Through a recent alert issued on August 19, 2014, CMS has announced that it will be providing a mechanism for users of the Workers’ Compensation Medicare Set-Aside Portal (WCMSAP) to enter prescription drug information and calculate the proposed prescription drug portion of the WCMSA proposal.  The alert states that this will be available on all new and existing “work-in-progress” cases as of October 6, 2014. To access the alert, please click here.

A lookup tool will be provided to select the proper drug. Additionally, the tool will provide pricing and the prescription allocation will be automatically calculated once proper frequency is entered.

The alert provides that the new tool will include the following features:

  • New data-entry pages to provide users with the ability to indicate
    if a claimant is taking, or expecting to take prescription drugs as a
    result of the workers’ compensation injury.
  • Look-up tool that allows the user to search by drug name, National
    Drug Code (NDC) or manufacturer name.
  • Ability for user to select drug from look-up tool and add it to the
    portal case.
  • Ability for user to enter frequency for anticipated medications
    (per day, week or month) and system will calculate expected drug costs.

Helios Settlement Solutions applauds this action by CMS and believes that the new functionality will be very useful; submitters of WCMSAs through the WCMSAP will be assured of proper pricing of prescription drugs based upon monthly Redbook Drug Reference pricing in effect when the submission is sent in for review. This should alleviate a great deal of prescription drug pricing discrepancies that have typically occurred in the past.

It is unclear from this alert if submitters can use the tool to check pricing before the case is created/submitted. If submitters are able to do this, once the MSA is first prepared, the submitter could be informed of any possible changes in pricing.  The alert does not clearly indicate if this will be possible or part of the functionality. CMS did announce in its alert that more information will be forthcoming prior to the October 6, 2014 implementation and Helios is hopeful that CMS will offer that this functionality will be part of the new process.


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