On November 19th the Pennsylvania Supreme Court heard oral arguments in Federated Insurance Co. v. Summit Pharmacy, a case that could redefine prescription drug reimbursement in workers’ compensation.

The dispute stems from a January 2024 Commonwealth Court decision that the Bureau of Workers’ Compensation’s use of RED BOOK^® for Average Wholesale Price (AWP) was inconsistent with the statute and directed the Bureau to adopt a nationally recognized pricing schedule. The Supreme Court is now considering whether to uphold that decision.

During arguments, the Supreme Court questioned whether RED BOOK truly reflects an “average” price. Federated contended that RED BOOK inflates costs, proposing alternatives benchmarks to calculate pricing, while Summit argued RED BOOK has long been accepted and warned that changing benchmarks could disrupt medication access.

The Supreme Court has not issued a ruling, but a decision is expected in the coming months. If the Commonwealth Court’s ruling stands, Pennsylvania could abandon RED BOOK pricing, impacting claim costs, fee disputes, and pharmacy billing practices statewide.

The court’s decision could reshape pharmacy reimbursement standards across the workers’ compensation industry. AWP has been a long-standing benchmark but growing scrutiny from courts and regulators question whether it truly reflects market costs. If the Commonwealth Court's ruling is upheld, Pennsylvania will be required to adopt an alternative nationally recognized benchmark, potentially influencing other states to follow suit.