Compound Pain Creams: The Battle Continues

Chartwell Law


For the past few years, compound pain creams and their astronomical prices have been the subject of substantial discussion in the workers’ compensation arena.  Recently, the compounding pharmacies’ position gathered momentum as the Commonwealth Court has decided another, case more-so, in its favor.

In August, 2018, the Commonwealth Court decided whether or not the parties’ C&R Agreement, that specifically denounced employer’s liability with respect to compound pain creams filled by Armour Pharmacy, trumped Armour Pharmacy’s due process rights.  In Armour Pharmacy v. Bureau of Workers’ Compensation Fee Review Hearing Office (Nat’l Fire Ins. Co. of Hartford), 1613 C.D. 2017 (Pa. Cmwlth. 2018), liability for payment of the compound pain creams was first established through the Utilization Review process.  Later the specific amount employer was required to pay, was also established through the first level of the fee review process.  Employer appealed the initial fee review determination and while that was pending, the claimant and employer came to resolution of his work injury via Compromise and Release.  The parties specifically denounced employer’s liability to pay for the compound pain cream.  As a result, the fee review hearing officer vacated the initial determination after presentation of the C&R Agreement during litigation.  Upon the pharmacy’s further appeal, the Commonwealth Court reversed the hearing officer’s decision.  The court was tasked with weighing the claimant and employer’s rights, under Section 449(a) of the act, in coming to resolution against the pharmacy’s due process rights.

The court noted that Section 449(a) provides that “nothing in this act shall impair the right of the parties interested to compromise and release . . . any and all liability which is claimed to exist under this act on account of injury or death.”  77 P.S. §1000.5(a).  However, the court held that Section 449(a) relates only to the rights of the parties, and Armour Pharmacy was not a party to the Compromise and Release.  The court further held that the pharmacy could not be deprived of its due process rights, since it did not have the opportunity to be heard during the settlement adjudication.  Employer remained responsible for paying for the compound pain cream.

Just eight months later, the Commonwealth Court again interpreted two legal tenets, jurisdiction and due process, more favorably for Armour Pharmacy than employers.  On March 29, 2019, the Commonwealth Court rendered its opinion in Armour Pharmacy v. Bureau of Workers’ Compensation Fee Review Hearing Office (Wegman’s Food Markets, Inc., No. 1725 C.D. 2017 (Pa. Cmwlth. 2019).

In this case, claimant was prescribed a compound pain cream, which Armour Pharmacy filled on three occasions.  They invoiced the employer over $3,600.00 for each tube.  The employer denied payment on each invoice for different reasons, including the fact that the charge exceeded the fees established by the fee schedule, compound pain creams were not covered, a letter of medical necessity was required, treatment was refused by claimant, a Utilization Review was filed, and submission was improper without medical records.

Armour Pharmacy filed three fee review applications.  At the initial stage, the Medical Fee Review Section found that the denial was timely, but that the employer owed the pharmacy approximately $3,300.00 for each tube, plus interest, pursuant to the fee schedule.

Employer requested a de novo hearing on appeal of the fee review determinations identifying the legal issues as: 1) whether the fee reviewers lacked jurisdiction because the pharmacy lacked “provider” status, 2) whether the bills were consistent with the proper statutory rates, and 3) whether the award was in excess of the statutory rates.

Procedurally, employer then sought to dismiss its own appeal based upon the first legal issue – that the fee review officer lacked jurisdiction to decide the matter because the pharmacy was not a “provider.”  The fee review officer granted employer’s motion to dismiss.  Because jurisdiction was lacking, the original Medical Fee Review Section’s determinations regarding employer’s liability to pay the invoices at $3,300.00 a tube was also vacated.

The pharmacy appealed, arguing that the court should reconsider because it leaves a supplier without recourse whenever an employer refuses payments for the reason that the supplier is not a “provider” within the meaning of the Workers’ Compensation Act.  The pharmacy requested that the bureau promulgate a regulation to create a remedy for putative providers to obtain a determination regarding their status under the Act, otherwise they would be deprived of property without due process of law.

The court started its analysis by reviewing an employers’ liability for medical care generally, as well as the procedures for submitting and obtaining payment for the same.  The Workers’ Compensation Act requires that employers must pay for “reasonable surgical and medical services, services rendered by physicians or other health care providers . . . medicines and supplies, as and when needed.”  77 P.S. § 531(1)(i).  Once the bills and records have been submitted for covered medical care, an employer has thirty 30 days to pay.  77 P.S. § 531(5).  If a provider disputes the amount or timeliness of payment, provider shall file an application for fee review.  77 P.S. § 531(5).

The court then looked at the law governing the fee review process.  Pursuant to the same, the court noted that the only legal issue a fee review office can hear is the amount and timeliness of payment made, as the fee review process presupposes liability has been established for the injury, and accordingly employer’s obligation to pay for the medical treatment.  34 Pa. Code. § 127.251; 34 Pa. Code § 127.255(1).  The court noted that whether or not an entity is a “provider” is a question of whether liability has been established, and thus, is beyond the scope of a fee review proceeding.

The court noted that it had faced a similar issue in Selective Insurance Company of America v. Bureau of Workers’ Compensation Fee Review Hearing Office (The Physical Therapy Institute), 86 A.3d 300 (Pa. Cmwlth. 2014), when employer filed an appeal to the original Medical Fee Review Section’s decision that employer was liable for payments for charges submitted by The Physical Therapy Institute.  In its appeal, employer argued that The Physical Therapy Institute was a billing agency, and thus, not a provider.  The fee review officer found that it lacked jurisdiction to decide if the entity was a provider.  The Physical Therapy Institute appealed, putting forth an almost identical argument to Armour Pharmacy.  The Commonwealth Court agreed with the fee review officer, finding specifically that claimants could file Penalty Petitions seeking to have the bill paid, during which “provider” status could be properly litigated and because “[t]he absence of a direct statutory remedy for providers does not mean that the court may expand the scope of a fee review to create a remedy.  The matter is one for the legislature, assuming there is a need for a provider to have another remedy.”  Selective Insurance, 86 A.3d 300 at 305.

In the current case, Armour Pharmacy sought to limit the court’s holding in Selective Insurance by making almost identical arguments regarding lack of remedy and due process.  In addressing Armour Pharmacy’s due process argument, the court noted that due process requires review of an adjudication.  Pa Const. art. V, § 9.  A valid adjudication is one in which an entity has notice of, an opportunity to be heard, and a complete record is kept of the proceedings.  2 Pa. C. S. § 504.  The court held that the fee review process meets these standards.  Accordingly, the court held that:

[w]here the employer challenges a fee determination of the Medical Fee Review Section for the stated reason that the medical service was not rendered by a “provider” within the meaning of the Act, that threshold question must be decided by the Hearing Officer.

The court stated that this holding does not expand jurisdiction to the fee review hearing officer.  It does not infringe upon the other ways to dispose of medical billing issues, such as through the Utilization Review process, or through the litigation process like when a workers’ compensation Judge is adjudicating a Claim Petition or Penalty Petition.

The court also noted that jurisdiction to determine who is a “provider” also remains with the workers’ compensation judges, such as in the context of Penalty or Review Petitions.  Claimants can still be successful in obtaining payment for pharmacies like Armour Pharmacy in the context of these Petitions, as well.

In opposition to and what appears to be a shift from its previous holding in Selective Insurance, the court has shifted its paradigm to a much more friendly litigation environment to compounding pharmacies.

In summary, compounding pharmacies continue to gather momentum in terms of rights under the Pennsylvania Workers’ Compensation Act.  If you have a question about handling, processing, or defending against compound pain cream claims, please contact our firm.  We continue to work on ways to thwart the costs of this type of treatment through medical investigation, including lack of efficacy of compound pain creams, as well as calculation of their cost under the fee schedule.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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