Federated Insurance Company v. Summit Pharmacy (Bureau of Workers’ Compensation Fee Review Hearing Office); No. 115 C.D. 2023; filed Jan. 2, 2024; President Judge Cohn Jubelirer

A Fee Review Hearing Officer ordered the carrier/petitioner to pay Summit Pharmacy approximately $72,500 as reimbursement for generic drugs provided to the claimant for her work injuries. In ordering the reimbursement, the Hearing Officer used the “Red Book” values for the prescriptions, which the Bureau adopted as the average wholesale price (AWP) to be used in resolving such disputes over pharmaceuticals.

The petitioner appealed to the Commonwealth Court, challenging the use of the Red Book values by the Hearing Officer and the Bureau. According to the petitioner, use of the Red Book values was inconsistent with Section 306 (f.1)(3)(vi)(A) of the Act, which limits reimbursement of pharmaceuticals to “110 per centum of the…AWP of the product.” The petitioner maintained that Red Book values cannot reflect the AWP because of how the values are derived; therefore, the Bureau exceeded its statutory authority by adopting the Red Book. Additionally, the petitioner argued that if using the Red Book is not inconsistent with the Act, its ongoing adoption represents an improper delegation of legislative authority to a private entity under Protz v. WCAB (Derry Area School District), 161 A.3d 827 (Pa. 2017).

The Commonwealth Court agreed that the Red Book values did not reflect AWP as required by the Act. According to the court, the regulations identifying the Red Book values as the AWP to resolve payment disputes over pharmaceuticals were invalid, as a matter of law. The court also directed the Bureau to promptly identify and publish in the Pennsylvania Bulletin a different, nationally recognized schedule to be used to determine AWP.

The court remanded the matter to the Hearing Officer to determine the appropriate reimbursement due the respondent but stayed the proceedings with the Hearing Officer pending the Bureau’s identification of a “nationally recognized schedule” of AWP to be used in payment disputes and publication of that schedule in the Pennsylvania Bulletin, as required by Section 127.131(b) of the Regulations.