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COST CONTROL FEATURES OF HEALTH PLANS MAY RESULT IN LIABILITY

Executive Summary

COST CONTROL FEATURES OF HEALTH PLANS MAY RESULT IN LIABILITY for employers and other providers if the features result in harm to the health care recipient, Oregon University College of Pharmacy professor Lee Strandberg, PhD, suggested at a Nov. 14 symposium sponsored by the National Pharmaceutical Council (NPC) and the American Medical Care and Review Association (AMCRA). Referring to the potential situation as "vicarious liability," Strandberg said: "There is legal precedent which indicates that employers may be liable if the cost control features of their employees' health plan caused damage to an employee." Strandberg indicated that the most likely area for vicarious liability involves cost control features of a health plan that encourage use of generics or other brands where drug products are not interchangeable. "I think that when plan design either forces or gives the patient an economic incentive to change from generic to brandname drugs or brand to generic and damage results, the employer may be liable," Strandberg said. For example, "what if you had a patient stabilized on Dilantin and the employer changed to a $3/$5 or $5/$7 copay feature." If the patient requested the generic because of the increased copay, and did not consult his physician first, the employer or provider might be liable for any resulting damages, Strandberg contended. To date, there have not been any cases where the cost reduction features of a prescription drug plan resulted in vicarious liability for the plan provider. However, Strandberg cited as precedent a 1986 California case (Wickline v. State) where the state was held responsible for damages that resulted when a patient was released prematurely from the hospital because the state would not reimburse for additional stay. That decision was subsequently reversed at the appeal level. Although vicarious liability has not come up in the prescription drug plan area, Strandberg predicted that it will become a fertile ground for suits under managed care systems. "As the health care system becomes more managed and decisions are made by others on the patient's behalf, patient options in this area will increase," Strandberg declared. "The patient could argue that he should not have been given the opportunity to decide something when he knew nothing about the consequences." Addressing liability for therapeutic substitution in a presentation to the meeting Nov. 15, Washington lawyer Steven Epstein (Epstein, Becker & Green) told the group that managed care providers could be liable for damages indirectly resulting from formulary decisions on therapeutic substitution. "You may have some potential HMO malpractice liability for utilization review decisions," Epstein said. Noting that HMOs do not typically have as much physician involvement in formulary decisions as hospitals, Epstein said the "reduced physician involvement in therapeutic substitution decision-making may shift liability to the HMO." Epstein also suggested that HMOs may be more vulnerable to liability from therapeutic substitution decisions because they often do not notify a physician of the substitution, whereas a hospital usually notes the substitution on a patient's chart."

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