Effective January 1, 2012 the California State Law prohibits physician self-referral in the context of workers' compensation cases. Physicians will no longer be able to own an interest in a company that supplies prescription drugs and medical devices/implants. This law effectively reverses the existing California law and outlaws Physician Owned Companies (POC's) in the workers' comp space. The primary focus of the law was to address the perceived abuses related to compounded drugs (steroids or human growth hormones) and medical foods the primary objective was to place checks and balances on physician self-referral when it comes to medical implants. Many of you know that there is a growing trend across the country where workers' comp attorneys, physicians and distributors are collaborating to take advantage of workers' comp patients.
Section 139.3 (a) of the California Labor Code as amended by AB378 states the following;
Not withstanding any other law, to the extent that those services are paid pursuant to [the workers' compensation program], it is unlawful for a physician to refer a patient for pharmacy goods, whether for treatment or medical legal purposes, if the physician or his or her immediate family has a financial interest with the person or in the entity that receives the referral.
The statute also provides that no claim for payment shall be presented by an entity to any individual, third party payor, or other entity for any goods or services furnished pursuant to a referral prohibited under Section 139.9. Violation of section 139.3(a) shall be a misdemeanor, and that the appropriate licensing board shall review the facts and circumstances of any conviction pursuant to the statute and take appropriate disciplinary action if the licensee has committed unprofessional conduct. In addition, violations of this section may be subject to civil penalties of up to $5,000 for each offense, which may be enforced by the California Attorney General, the Insurance Commissioner or District Attorney.
It will be of interest to gauge the response from the many POC's and POD's that have infiltrated the California market from the East Bay all the way to Orange County. All medical devices will contain an FDA required Rx only or similar label. This prohibition applies to POC's that are supplying spinal impants and orthopedic devices. Could other states be watching the outcome? TSB wants to know has this been a long time coming? With prohibition being enforced by the Attorney General for the State of California, the market is 2/3's of the way from completely banning POC's and POD's. No matter what the outcome, TSB is sure that there will be some legal challenge to this law as it continues to evolve to eliminating POC's and POD's. You know what JB would sing:
God sends his spaceship to America the beautiful
They land at six o'clock, and there we are the dutiful
Eating from TV Trays watching Happy Days
Waiting for WWIII while Jesus slaves
To the mating calls of Lawyers in Love