RENDERED: DECEMBER 8, 2023; 10:00 A.M.

NOT TO BE PUBLISHED

Commonwealth of Kentucky

Court of Appeals

NO. 2022-CA-0524-WC

KENTUCKY INSURANCE GUARANTY ASSOCIATION APPELLANT

PETITION FOR REVIEW OF A DECISION

v. OF THE WORKERS’ COMPENSATION BOARD

ACTION NO. WC-00-88836

CHARLES BAKER; DR. SAI GUTTI/PAIN

MANAGEMENT CENTER; RX DEVELOPMENT;

HONORABLE JOHN B. COLEMAN, ADMINISTRATIVE

LAW JUDGE; AND WORKERS’ COMPENSATION

BOARD APPELLEES

OPINION

AFFIRMING

**   **  **

BEFORE: ECKERLE, JONES, AND MCNEILL, JUDGES.

JONES, JUDGE: Kentucky Insurance Guaranty Association (KIGA) appeals an 

order of an administrative law judge (ALJ), as affirmed by the Workers’ 

Compensation Board (Board), which resolved a medical fee dispute it filed against 
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Dr. Sai Gutti/Pain Management Center (Gutti) and Rx Development (RX). Upon 

review, we affirm.

I. BACKGROUND

The underlying medical fee dispute was filed by KIGA in early 2014

on behalf of its insured, Jarissa, Inc.;

1

and against its insured’s employee, Charles 

Baker, along with Baker’s medical providers, Gutti and RX. Gutti and RX 

operated a physician dispensary and sought reimbursement from KIGA after filling 

several of Baker’s prescriptions that were undisputedly covered under Baker’s 

workers’ compensation award against Jarissa, Inc. KIGA filed its post-award 

medical fee dispute to challenge the prices Gutti and RX were billing it for those 

prescriptions. On December 22, 2020, the ALJ entered a final order resolving 

KIGA’s dispute. And, as the breadth of what is set forth below tends to indicate, 

KIGA was disappointed with much of the ALJ’s order.

KIGA’s appeal raises the following issues: (1) whether the Board 

erred by not sanctioning Gutti and RX for filing an untimely brief at the 

administrative appellate level; (2) whether 803 Kentucky Administrative 

Regulation (KAR) 25:092 (1993), the now-superseded regulation2that governed

1 KIGA identified itself in its pleadings below as “Kentucky Insurance Guaranty Association as 

insurer/payment obligor for Jarissa, Inc.,” but has now shortened its moniker to simply 

“Kentucky Insurance Guaranty Association.”

2 While 803 KAR 25:092 was amended in 2021 and 2022, only the 1993 version of 803 KAR 

25:092 is relevant to this appeal.
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the underlying fee disputes, required Gutti and RX to disclose their “actual 

acquisition costs” for the prescriptions at issue to secure reimbursement from 

KIGA; (3) whether the ALJ’s ultimate determination regarding the applicable rate 

of reimbursement was supported by substantial evidence and otherwise consistent 

with the aforementioned regulation; and (4) whether KIGA was entitled to 

restitution or credit for any amount it may have over-reimbursed Gutti and RX. 

We will address those issues sequentially. Additional facts will be discussed in the 

course of our analysis.

II. STANDARD OF REVIEW

The issues presented by the parties primarily require us to interpret 

statutory and regulatory provisions, which are legal issues we review de novo. 

Saint Joseph Hosp. v. Frye, 415 S.W.3d 631, 632 (Ky. 2013). Apart from that, our 

function is to correct the Board only where we perceive that it has “overlooked or 

misconstrued controlling statutes or precedent, or committed an error in assessing 

the evidence so flagrant as to cause gross injustice.” W. Baptist Hosp. v. Kelly, 827 

S.W.2d 685, 687-88 (Ky.1992). If the factfinder held in favor of the party with the 

burden of proof, the burden on appeal is only to show that substantial evidence 

supported the decision. See also Special Fund v. Francis, 708 S.W.2d 641, 643 

(Ky. 1986). Conversely, if the factfinder held against the party with the burden of 

proof, that party, on appeal, must “show that the ALJ misapplied the law or that the 
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evidence in her favor was so overwhelming that it compelled a favorable 

finding[.]” Gray v. Trimmaster, 173 S.W.3d 236, 241 (Ky. 2005).

III. ANALYSIS

1. The Board’s refusal to sanction Gutti and RX for filing an untimely brief

was at most harmless error.

When Gutti and RX filed their combined responsive brief and crosspetition for review before the Board, their brief was untimely by a margin of 

roughly three months. Citing that fact, KIGA moved the Board to sanction Gutti 

and RX by striking their responsive brief and dismissing their cross-petition. The 

Board refused to do so but did not elaborate upon its ruling. KIGA argues the

Board erred and should be reversed in this respect.

We disagree. 803 KAR 25:010 § 22(12)

3 vests the Board with broad 

discretion to sanction tardy briefs as it deems appropriate. However, there is no 

indication that the posture of the instant appeal would have meaningfully differed 

even if the Board had sanctioned Gutti and RX in the manner KIGA requested. 

True, the Board did not dismiss Gutti’s and RX’s cross-petition. But, it affirmed

3

803 KAR 25:010 § 22(12) provides: “Sanctions. Failure of a party to file a brief conforming to 

the requirements of this administrative regulation or failure of a party to timely file a response 

may be grounds for the imposition of one (1) or more of the following sanctions: (a) Affirmation 

or reversal of the final order; (b) Rejection of a brief that does not conform as to organization or 

content, with leave to refile in proper for within ten (10) days of the date returned. If timely 

refiling occurs, the filing shall date back to the date of the original filing; (c) Striking of an 

untimely response; (d) A fine of not more than $500; or (e) Dismissal.”
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with respect to their cross-petition. Gutti and RX thereafter filed no appeal; and 

thus, as a practical matter, the same result was ultimately achieved. Furthermore, 

even if the Board had stricken Gutti’s and RX’s response to KIGA’s appeal, doing 

so in and of itself would not have precluded the Board from reviewing KIGA’s 

appeal on the merits – without the assistance of any responsive brief from Gutti 

and RX – and nevertheless affirming the ALJ as it did below.

4

In sum, even if the 

Board abused its discretion by failing to sanction Gutti and RX consistently with 

KIGA’s motion, KIGA was not discernably prejudiced. Nothing more than 

harmless error resulted.

2. The regulation that governed the underlying fee disputes did not require 

Gutti and RX to disclose their “actual acquisition costs” for the prescriptions 

at issue to secure reimbursement.

On February 2, 2018, KIGA moved the ALJ to compel production of 

the following discovery from Gutti and RX:

A copy of each actual invoice received and paid by IWP 

[sic] and/or Dr. Gutti (including any discounts, rebates, 

incentives, etc. that comprise the actual price paid) for 

each prescription it is seeking reimbursement for. In the 

KESA v. IWP claim, the Supreme Court established that 

the appropriate reimbursement price for pharmaceuticals 

shall be the actual price paid by the pharmaceutical 

provider plus a $5.00 dispensing fee. In order to 

appropriately determine the amount of the proper 

reimbursement to IWP [sic] and/or Dr. Gutti for the 

4 Notably, in workers’ compensation appeals before this Court, respondents may but are not 

required to file a brief. See Kentucky Rule of Appellate Procedure (RAP) 49(F).
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prescriptions provided, they must produce this 

information.

KIGA also sought an order compelling RX to produce a designated 

corporate spokesperson to provide testimony regarding this requested discovery, 

claiming that for purposes of its medical fee disputes, the “correct” pricing for the 

prescribed medications at issue could not be determined unless RX and Gutti 

disclosed the wholesale prices they had actually paid for them.

RX and Gutti objected, claiming among other grounds that KIGA was 

improperly seeking trade secrets from them, i.e., “privileged business information 

as to RX Development’s business operations, billings and profits”; and that in any 

event “[t]he issues presented are legal not factual.” In resolving KIGA’s motion, 

the ALJ refocused the issue, indicating that the dispositive question was not what 

RX and Gutti had actually paid for the prescriptions, but whether the amount they

had billed KIGA was “outside of the pharmaceutical fee schedule” set forth in 803 

KAR 25:092 (1993). The ALJ elaborated upon this point in a September 9, 2019 

order overruling KIGA’s motion to compel, explaining in relevant part:

[T]he burden is on the payment obligor to make out a 

prima facie showing for reopening by delineating what 

the payment obligor believes to be the average wholesale 

price or the average-to-sell price prior to the setting of a 

proof schedule.

. . .
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Given the fact that the payment obligor has yet to provide 

what it believes to be the average wholesale price or 

average-to-sell price for any of the contested 

medications, the objections to the motions to compel are

sustained.

. . .

The defendant is obligated to pay the outstanding charges 

at what it believes to be the appropriate average 

wholesale price or average-to-sell price as there is no 

justification for withholding the entirety of the payment 

for the outstanding prescriptions which have been filled.

In other words, the ALJ held that the information KIGA sought to 

discover from RX and Gutti would not satisfy KIGA’s initial evidentiary burden 

on reopening and was thus irrelevant. On appeal, KIGA argues the ALJ erred in 

overruling its motions to compel, claiming the discovery it requested was relevant 

and essential to its medical fee disputes. We disagree. 

The irrelevance of what RX and Gutti actually paid for the 

prescriptions at issue is best illustrated through a hypothetical: Suppose RX and 

Gutti were able purchase all the prescriptions at issue from a wholesaler for 

nothing. How would this impact their right to “reimbursement”? For the answer, 

we turn to 803 KAR 25:092 (1993), which was operative when Gutti and RX 

submitted their reimbursement requests. In relevant part, it provided:

Section 1. Definitions. . . .

. . .
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(6) “Wholesale price” means the average wholesale price 

charged by wholesalers at a given time.

Section 2. Payment for Pharmaceuticals. ( 1) An 

employee entitled to receive pharmaceuticals under KRS 

342.020 may request and require that a brand name drug 

be used in treating the employee. Unless the prescribing 

practitioner has indicated that an equivalent drug product 

should not be substituted, an employee who requests a 

brand name drug shall be responsible for payment of the 

difference between the equivalent drug product 

wholesale price of the lowest priced therapeutically 

equivalent drug the dispensing pharmacist has in stock 

and the brand name drug wholesale price at the time of 

dispensing.

(2) Any duly licensed pharmacist dispensing 

pharmaceuticals pursuant to KRS Chapter 342 shall be 

entitled to be reimbursed in the amount of the equivalent 

drug product wholesale price of the lowest priced 

therapeutically equivalent drug the dispensing pharmacist 

has in stock, at the time of dispensing, plus a five (5) 

dollar dispensing fee plus any applicable federal or state 

tax or assessment.

(3) If an employee’s prescription is marked “Do Not 

Substitute,” the dispensing pharmacist shall be entitled to 

reimbursement in an amount equal to the brand name 

drug wholesale price, at the time of dispensing, plus a 

five (5) dollar dispensing fee plus any applicable federal 

or state tax or assessment.

To review, § 1(6) of this regulation provided that “‘Wholesale price’

means the average wholesale price charged by wholesalers at a given time.” 

(Emphasis added.) In turn, § 2(1), (2) and (3) each specified that given time: 

According to those provisions, the amount of reimbursement Gutti and RX were 
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entitled to receive depended solely upon the wholesale price of the drug product 

they dispensed – or “the lowest priced therapeutically equivalent drug the 

dispensing pharmacist has in stock,” whatever the case may be – “at the time of 

dispensing.” (Emphasis added.) Thus, if Gutti and RX paid nothing to acquire the 

drug product, but the average wholesale price charged by wholesalers for that drug 

product – or “the lowest priced therapeutically equivalent drug the dispensing 

pharmacist has in stock,” whatever the case may be – was “X” at the time they 

dispensed it,5the above regulation would have entitled Gutti and RX to 

reimbursement in the amount of “X,” in addition to “a five (5) dollar dispensing 

fee plus any applicable federal or state tax or assessment.” See § 2(2) and (3).

KIGA, in maintaining that the discovery it requested was relevant and 

essential to its medical fee disputes, does not discuss any of the regulatory 

language set forth above. Instead, KIGA’s argument appears limited to the 

following proposition: Knowing what RX and Gutti actually paid a wholesaler for 

the prescriptions at issue was relevant because our Supreme Court said so. In 

support, KIGA quotes from our Supreme Court’s interpretation of 803 KAR 

25:092 (1993), as set forth in Steel Creations By and Through KESA, The Kentucky 

Workers’ Compensation Fund v. Injured Workers Pharmacy, 532 S.W.3d 145, 

5 Undisputedly, the actual cost of a given drug product can vary on a daily basis.
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156-57 (Ky. 2017); and KIGA emphasizes that our Supreme Court’s interpretation

repeatedly utilized the words “actual” and “paid”:

So, how should pharmacy reimbursement rate disputes be 

resolved? The same way all other disputes under KRS 

342 are resolved. The parties present their proof, and the 

ALJ makes a determination. The ALJ may, but is not 

required to, take into consideration the published average 

wholesale price. The ALJ may also take into 

consideration the wholesale acquisition price, which has 

some connection to what a wholesaler would charge a 

retailer. However, unless the ALJ determines that the 

published average wholesale price or the wholesale 

acquisition price is the actual average wholesale price the 

pharmacist paid, the ALJ may not simply adopt either of 

those pricing guides in toto.[FN]

[FN] For the sake of clarity, we are not 

stating that any of the pricing guides are per 

se admissible. Any such guide must be 

admissible pursuant to 803 KAR 25:010 

Section 14, and the ALJ is free to exercise 

his or her discretion in either admitting or 

excluding a proffered pricing guide within 

the confines of that regulation. Based on the 

record before us in this case, it appears that 

the published average wholesale price 

guides and the wholesale acquisition price 

guide may not be particularly relevant. 

However, none of the parties have sought to 

introduce into evidence any of those pricing 

guides. If a party attempts to do so and 

there is an objection, the ALJ must 

undertake the appropriate analysis before 

admitting or excluding any proffered pricing 

guides.

The ALJ must determine the actual wholesale price the 

pharmacist paid, which may or may not have a relevant 
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correlation to either the published average wholesale 

price or the wholesale acquisition price. Regardless, the 

ALJ, by exercising the discretion granted to him or her, 

must determine what the appropriate reimbursement rate 

is under the regulation.

We recognize that this could, as IWP argues, put a 

considerable strain on the already busy ALJs. That may 

or may not be the case. However, if that occurs, the 

Department can take the appropriate steps to remedy the 

situation by amending the regulation.

As to this case, the CALJ did not order KESA to 

reimburse IWP based on the published average wholesale 

price that IWP charged. He ordered KESA to reimburse 

IWP pursuant to the statute and regulations, which he 

correctly interpreted to be the actual average wholesale 

price IWP paid. However, the CALJ did not make any 

specific findings regarding the actual average wholesale 

price IWP paid for the medications it dispensed.

. . .

[T]he regulation states that reimbursement is based on 

what the dispensing pharmacy (IWP) paid for 

medications, not what another dispensing pharmacy 

(Walgreens, Kroger, Meijer, etc.) may have paid. 

Therefore, this matter must be remanded to the 

Department for assignment to an ALJ with instructions to 

make findings regarding what IWP’s actual average 

wholesale price was for the medications at issue.

(Emphasis added.)

With that said, we begin with the obvious: The words “actual” and 

“paid” do not appear in 803 KAR 25:092 (1993). It was also never held in the 

above-quoted case that reimbursement under that regulation was based upon what 
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the pharmacist requesting reimbursement “actually paid” for the drug product; to 

the contrary, our Supreme Court explained that reimbursement was based upon 

“the actual average wholesale price the pharmacist paid[.]” Injured Workers 

Pharmacy, 532 S.W.3d at 156 (emphasis added). As discussed, “wholesale price” 

was administratively defined as what “wholesalers” (thus, wholesalers in general) 

were charging pharmacists on “average” for the drug product at issue or its lowestpriced therapeutic equivalent “at a given time.” See 803 KAR 25:092 § 1(6) 

(1993). That “given time” – critical for ascertaining the average wholesale price 

for reimbursement purposes – was not when the pharmacist paid for the drug 

product at issue; it was “the time of dispensing.” See id. at § 2(1), (2), and (3). 

Taken in context, our Supreme Court’s statement that reimbursement was based 

upon “the actual average wholesale price the pharmacist paid” meant nothing more 

than this: The price that a pharmacist is deemed to have paid for a drug product, 

for purposes of reimbursement under 803 KAR 25:092 (1993), is the average price 

for which the drug product could have been purchased from a wholesaler when the 

pharmacist dispensed the drug product. 532 S.W.3d at 156.

Apart from that, two other salient points about Injured Workers 

Pharmacy, id., underscore that what the pharmacist requesting reimbursement 

actually paid is irrelevant. First, our Supreme Court emphasized – at length in 

what is quoted above – that an ALJ may resort to general pricing guides to 
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ascertain the applicable “wholesale price.” Second, the pharmacists requesting 

reimbursement in Injured Workers Pharmacy similarly never divulged what they 

actually paid for their dispensed drug products. Id. at 152. To be sure, our 

Supreme Court ultimately vacated and remanded that matter for the ALJ to 

“determine what [the pharmacist’s] actual average wholesale price was for the 

contested medications.” Id. at 158. But, our Supreme Court did not require the 

ALJ to “reopen proof” to make that determination – tacitly indicating that no proof 

of what the pharmacist actually paid was required. Id. In short, the ALJ and Board 

committed no error in this respect.

3. The ALJ’s ultimate determination regarding the applicable rate of 

reimbursement was supported by substantial evidence and otherwise 

consistent with 803 KAR 25:092 (1993).

KIGA begins this part of its appeal by arguing the Board incorrectly 

stated in its affirming opinion that “KIGA did not present any evidence setting 

forth the amounts it believed appropriate under the fee schedule.” KIGA is correct 

that, to the contrary, it did eventually present this type of evidence. Moreover, the 

evidence it eventually presented was, by all measures, substantial. Specifically, it 

submitted a November 10, 2019 report from a pharmo-economics expert, Dr. T. 

Joseph Mattingly, II, that provided several different estimates, based upon several 

different sources and methodologies, of the average wholesale prices applicable to

each of the various prescriptions at issue during the relevant time frames. 
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In his dispositive order, the ALJ began his summary of Dr. 

Mattingly’s report as follows:

The report included clear definitions of terms such as 

average wholesale price (AWP), national average drug 

acquisition cost (NADAC) and wholesale acquisition 

costs (WAC). The AWP is defined as an estimate of the

price retail pharmacies pay when purchasing from a 

wholesale distributor. The NADAC is a drug cost 

calculation developed through a national sample of drug 

acquisition cost estimated by CMS[6] using actual 

pharmacy invoices representing what the pharmacist paid 

to the wholesaler from the previous 30 days. The WAC 

represents the manufacturer’s “list price” for a drug to 

wholesalers or other direct purchasers that does not 

include discounts or rebates.

He provided an explanatory diagram depicting a 

manufacturer charging a wholesaler by utilizing the 

WAC of $100.00. The wholesaler then sells to the 

pharmacy utilizing the AWP of $120.00. The pharmacy 

then sells to the patient utilizing the usual and customary 

charge plus a dispensing fee for $150.00. Along each 

step in the supply chain, the charge is increased.

He provided documentation regarding the gross profits of 

independent pharmacy operations between 2017 and 

2018 to include the difference between cost of goods sold 

and sales. The cost of goods sold range between 76%

and 77.9% of the sales. Gross profits range between 

22.1% and 24%. He went on to explain that AWP is not 

defined federally, but is instead a list of drug prices 

published in commercial publications such as Medi-Span, 

First Data Bank and Redbook. He noted that sometimes 

the AWP is supplied by the drug manufacturer (e.g. 

Pfizer, Merck) to the companies by calling it the 

suggested wholesale price (SWP). The AWP is then 

6 Centers for Medicare and Medicaid Services.
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estimated by multiplying the WAC by 1.2 to assess a 

standard 20% markup.

He noted that Kentucky Medicaid reimburses at the 

lowest of NADAC, WAC, the federal upper limit, 

maximum allowable costs or usual and customary price.

Gutti’s and RX’s reimbursement requests at issue below were made 

between 2013 and 2019, and were made pursuant to 803 KAR 25:092 § 2(2)

(1993). KIGA paid Gutti and RX the full amount of each billing until the start of 

January 2018. Thereafter, KIGA reduced its payments to what it believed the 

regulation permitted it to pay Gutti and RX instead, i.e., an amount equivalent to 

“M. Joseph pricing.”

7

 KIGA, for its part, asserted that what it paid Gutti and RX 

for prescriptions filled before January 2018 had been grossly in excess of what it 

should have paid them under a proper application of the regulation. Gutti and RX, 

on the other hand, claimed that what KIGA paid them for prescriptions filled after

January 2018 was insufficient. With that in mind, the ALJ summarized Dr. 

Mattingly’s opinion regarding KIGA’s dispute over Baker’s medical fees relative 

to what KIGA paid Gutti and RX after January 2018. Discussing and applying the 

7 During the pendency of its medical fee dispute, KIGA had an arrangement with M. Joseph 

Medical, a company that specializes in helping workers’ compensation payment obligors such as 

KIGA establish prices with prescription drug suppliers. Under this arrangement, M. Joseph 

negotiates with pharmacy benefits managers (“PBMs”) to secure prices and terms with various 

pharmacies. KIGA pays M. Joseph for the prescription drugs, M. Joseph pays the PBMs, and the 

PBMs pay the pharmacies. This arrangement supposedly allowed KIGA to secure prescription 

drugs at a lower price than what was required by the workers’ compensation regulatory fee 

schedule set forth in 803 KAR 25:092 (1993).
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regulation and the substance of our Supreme Court’s holding in Injured Workers 

Pharmacy, the ALJ then explained:

[O]n the issue of reimbursement, the ALJ must look at 

the actual wholesale price paid, which may or may not 

have a relevant correlation to either the published 

average wholesale acquisition price or the wholesale 

acquisition price. The ALJ must exercise the discretion 

granted to him or her to determine what the appropriate 

reimbursement rate is under the regulation. The court 

noted the ALJ might not simply adopt either the AWP or 

the wholesale acquisition price paid by a pharmacist. 

The court went on to state that KESA could not 

unilaterally impose its M. Joseph agreement on IWP.

A review of the entirety of the evidence, not only as 

summarized above, but as contained in the entire record, 

reveals the medical provider was utilizing the wholesale 

price closely resembling that published by Redbook. Dr. 

Mattingly explained that publications such as Redbook 

publish the AWP price, which he explained was jokingly 

referred to as “ain’t what’s paid.” Rosalie Ferris[8]

explained the AWP in publications such as Redbook do 

not include rebates obtained in purchasing. She 

explained the use of PBMs allowed KIGA to obtain 

additional discounts so that pharmaceuticals could be 

purchased at levels below AWP or the average-to-sell 

price.

Based upon the information contained in the report of Dr. 

Mattingly, I am convinced the method for determining 

the reimbursable amount under the Kentucky schedule of 

fees is to utilize the WAC multiplied by 1.2, which is 

then added to the $5.00 dispensary fee per prescription. 

The method takes into account the standard industry 

markup of 20% from the manufacturer to the wholesaler. 

8 Rosalie Faris provided expert testimony below regarding drug pricing. At that time, she was a 

registered nurse and Vice President of Managed Care for Occupational Managed Care Alliance.
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The WAC represents the wholesale acquisition costs as 

published by each pharmaceutical company at a point in 

time. I find it is more appropriate to use the WAC rather 

than the NADAC, which is determined after the fact by 

looking backward at amounts paid for acquisition, 

inclusive of discounts. Utilization of the NADAC would 

be completely unworkable as the pharmacy or dispensary 

would be unable to determine the NADAC amount at the 

time the medication is dispensed, as the information is 

based upon a future determination.

. . .

The Supreme Court made it clear that KIGA cannot 

impose M. Joseph pricing on the medical provider. 

Further pricing, which is “customary under the fee 

schedule for the medications paid to other local 

pharmacies” is not the requirement of 803 KAR 25:092, 

Section 2(2), which allows reimbursement at the 

wholesale price of the lowest priced therapeutically 

equivalent drug the dispensing pharmacist has in stock, at 

the time of dispensing, plus a five dollar dispensing fee, 

along with taxes. KIGA’s request to reimburse with M. 

Joseph pricing or pricing paid to other local pharmacies 

is simply an attempt to provide KIGA the benefit of 

lower prices negotiated by their PBMs, which were not 

negotiated with the pharmacy in question. It has little to 

do with the average wholesale price, which must be 

reimbursed. Instead, I am directed to look at the 

acquisition costs and the published wholesale pricing to 

make a determination as to the reimbursable amounts 

while utilizing my discretion.

Dr. Mattingly has provided us with the information 

necessary to determine the amount owed. KIGA 

requested allowance to make payment as if they were 

doing so under the Kentucky Medicaid schedule. 

However, this is not a Medicaid claim, but is instead a 

workers’ compensation claim governed by KRS Chapter 

342. Dr. Mattingly has provided average acquisition 
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costs and the wholesale acquisition costs for each of the 

medications in question. Those amounts are set forth in 

the summary of evidence. Dr. Mattingly explained that 

each step of the supply chain has a markup, which is 

generally 20%, in addition to a dispensary fee. Here, the 

acquisition costs can best be determined by utilizing the 

WAC, which provides the listed wholesale price for a 

drug to a wholesaler or other direct purchaser. It does 

not include discounts, which may be negotiated by a 

PBM or available under KIGA’s current managed care 

plan. However, they do not enjoy the benefit of those 

discounts across the board. To allow KIGA the benefit 

of implied discounts would have the effect of imposing 

the Medicaid rule on workers’ compensation providers.

The ALJ then resolved the underlying fee dispute – relative to what 

KIGA paid Gutti and RX after January 2018 – by applying the WAC method for 

ascertaining wholesale prices as set forth in Dr. Mattingly’s report:

Therefore, I find the acquisition cost for the medications 

dispensed between January 2018 and January 2019 to be 

$1,325.72, by utilizing the WAC set forth in Appendix II 

of Dr. Mattingly’s report. The amount billed by the 

medical provider is the amount published as the average 

wholesale price without consideration of likely discounts. 

The defendant requests the ALJ interpret the Injured 

Workers Pharmacy case to mean the provider can only 

charge a $5.00 dispensary fee above the wholesale 

acquisition costs. However, this is not my interpretation. 

Instead, I interpret the case to mean I must utilize the 

acquisition costs and the published wholesale prices to 

determine the amount available for reimbursement under 

the regulation, to include the $5.00 dispensary fee.

In this instance, the testimony of Rosalie Ferris indicates 

the bills were paid at 30% below what would typically be 

the average wholesale price and the opinion of Dr. 

Mattingly would indicate the acquisition price or WAC 
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would be multiplied by 1.2 to obtain the average 

wholesale price for a standard markup when explaining 

that each step in the supply chain has a standard markup.

The $1,325.72 acquisition cost multiplied by 1.2 reveals 

an average wholesale price of $1,590.86, which is below 

the $5,861.05 billed by the provider, but above the 

amount paid by KIGA. KIGA paid $1,327.90, which 

leaves $517.96 owing to the medical provider once the 

$255.00 for 51 dispensary fees ($5.00 x 51) is added to 

the average wholesale price of $1,590.86. Therefore, the 

balance due is $517.96.

On appeal, KIGA emphasizes in its brief that “Dr. Mattingly’s report 

clearly explains that NADAC provides the most appropriate estimate” for 

determining the average wholesale price applicable to drug products, and that it 

made “very clear in all of its briefs that it is of the position that NADAC must 

serve as the benchmark for determining what [Gutti and RX were] charged for the 

medications at issue.” But, KIGA stops short of arguing that the methodology 

selected by the ALJ was unsupported by substantial evidence or otherwise 

inconsistent with 803 KAR 25:092 § 2(2) (1993). 

Regardless, while the ALJ did not select the methodology favored by 

Dr. Mattingly, the ALJ did select a methodology Dr. Mattingly acknowledged as a 

recognized means of ascertaining the applicable wholesale price of prescriptions, 

and the ALJ provided a reasonable explanation for doing so. The ALJ may choose 

not only which expert to believe, but also what parts of the evidence or witness’s 

testimony to believe or disbelieve. See Caudill v. Maloney’s Discount Stores, 560 
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S.W.2d 15 (Ky. 1977). Furthermore, the ALJ’s analysis was consistent with the 

operative regulation and Injured Workers Pharmacy. Accordingly, to the extent 

KIGA is suggesting this aspect of the ALJ’s order was erroneous, its suggestion 

lacks merit.

4. KIGA was not entitled to restitution or a credit for any amount it may have 

over-reimbursed Gutti and RX.

The ALJ did not resolve the merits of KIGA’s medical fee dispute 

insofar as it concerned what KIGA may have overpaid Gutti and RX before

January 2018. Essentially, the ALJ held that this aspect of KIGA’s medical fee 

dispute was moot because he lacked authority under the circumstances to either 

order Gutti and RX to refund any overpayment to KIGA, or to grant KIGA any 

kind of offsetting credit against what remained outstanding. The Board affirmed. 

On appeal, KIGA maintains the ALJ erred in denying this aspect of its medical fee 

dispute because, in its view, the ALJ was either: (1) estopped from denying it 

reimbursement or a credit; or (2) authorized to grant it that relief.

We disagree. Regarding its first argument, the ALJ could not have 

granted KIGA relief based solely on equity or a common law principle such as 

estoppel. Rather, the ALJ was required to find, within the ambit of the Workers’ 

Compensation Act, warrant for the exercise of any authority he could have 

claimed. See Dep’t for Nat. Res. and Envt’l Prot. v. Stearns Coal & Lumber Co., 

563 S.W.2d 471, 473 (Ky. 1978). “Workers’ compensation is a creature of statute, 
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and the remedies and procedures described therein are exclusive.” Williams v. 

Eastern Coal Corp., 952 S.W.2d 696, 698 (Ky. 1997).

Before leaving this point, we pause to note that much of KIGA’s 

estoppel argument is based upon what KIGA believes was the ALJ’s inequitable 

conduct during the proceedings below. Specifically, KIGA notes that in June 

2014, near the beginning of its underlying medical fee dispute, it filed a motion for 

interlocutory relief asserting that it would suffer irreparable harm “if it were 

required to pay [Gutti’s and RX’s] inflated prices”; and that in a July 29, 2014 

order, the ALJ denied its motion, stating as follows:

After a review of the motion, same is hereby overruled as 

there is no showing the defendant will suffer irreparable 

harm during the proceedings. The defendant shall pay 

the outstanding charges pursuant to the current medical 

fee schedule. Any issue of overpayment can be dealt with 

at the conclusion of the claim.

(Emphasis added.)

KIGA asserts it reasonably interpreted the above-emphasized 

language of the ALJ’s order to mean that any overpayment it thereafter made to 

Gutti and RX would be reimbursed at the conclusion of the proceedings; that in 

reliance upon this language, it then reimbursed the full amount of each invoice 

Gutti and RX thereafter submitted to it until January 2018; and that when the ALJ

ultimately did not direct Gutti and RX to reimburse any of its alleged 
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overpayments “at the conclusion of the claim,” the ALJ effectively went back on 

his word.

There are at least two flaws in that proposition, both of which emanate 

from KIGA’s misreading of the ALJ’s order. First, the ALJ only required KIGA to 

pay Gutti and RX “pursuant to the current medical fee schedule,” not the full 

amount of Gutti’s and RX’s invoices. Second, the ALJ stated that “Any issue of 

overpayment can be dealt with at the conclusion of the claim” – not that any 

overpayment would be refunded at the conclusion of the claim, irrespective of the 

legislative constraints on the ALJ’s authority.

This leads to KIGA’s second argument. KIGA contends that two 

statutory provisions – by themselves or in conjunction with one another –

authorized the ALJ to grant it restitution representing its alleged overpayments. 

The first provision is KRS 342.990(11), which KIGA asserts “allows for restitution 

to be ordered by an ALJ, without any showing of misconduct.” (KIGA’s 

emphasis.) However, KIGA’s assertion ignores the plain language of that 

provision. KRS 342.990(11) states in relevant part that “any administrative law 

judge . . . may order restitution of a benefit secured through conduct proscribed by 

this chapter.” (Emphasis added.) Unless KIGA overpaid for prescriptions because 
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Gutti and RX engaged in conduct forbidden or prohibited9 by KRS Chapter 342, 

KRS 342.990(11) could not have authorized restitution.

The second provision of KRS Chapter 342 that KIGA relies upon is

KRS 342.035(2), which states in relevant part:

No provider of medical services or treatment required by 

this chapter, its agent, servant, employee, assignee, 

employer, or independent contractor acting on behalf of 

any medical provider, shall knowingly collect, attempt to 

collect, coerce, or attempt to coerce, directly or 

indirectly, the payment of any charge, for services 

covered by a workers’ compensation insurance plan for 

the treatment of a work-related injury or occupational 

disease, in excess of that provided by a schedule of fees, 

or cause the credit of any employee to be impaired by 

reason of the employee’s failure or refusal to pay the 

excess charge. . . .

(Emphasis added.) 

However, the ALJ held that Gutti and RX did not engage in conduct 

forbidden or prohibited by KRS 342.035(2), and that restitution or reimbursement 

therefore could not be ordered through KRS 342.990(11). In that regard, the ALJ 

explained:

Given the fact the medical provider relied on a trusted 

publication (Redbook) to determine pharmaceutical 

charges, I find the medical provider did not knowingly

collect, attempt to collect, coerce, or attempt to coerce, 

directly or indirectly, the payment of any charge, for 

9

See, e.g., BLACK’S LAW DICTIONARY 1236 (7th ed. 1999) (defining “proscribe” as “To outlaw 

or prohibit; to forbid.”).
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services covered by workers’ compensation in excess of 

that provided by the medical schedule of fees.

(Emphasis added.)

KIGA maintains that KRS 342.035(2) permitted the ALJ to award it 

restitution for any amount it may have overpaid Gutti and RX. But, KIGA fails to 

address the ALJ’s finding that Gutti and RX lacked the requisite mens rea and thus 

did not violate that provision. KIGA has accordingly conceded that this part of the 

ALJ’s judgment was correct. See, e.g., Osborne v. Payne, 31 S.W.3d 911, 916 

(Ky. 2000) (“Any part of a judgment appealed from that is not briefed is affirmed 

as being confessed.”). 

Lastly, KIGA insists that two published cases indicate it should have 

been granted reimbursement under the circumstances of this case. The first of 

these cases is Yocum v. Travelers Ins. Co., 502 S.W.2d 520 (Ky. 1973). However, 

if KIGA is citing Yocum for the proposition that specific statutory authorization for 

reimbursement is unnecessary, Yocum undermines KIGA’s position. There, the 

employer voluntarily paid income benefits for which the Special Fund was 

ultimately held liable. The Special Fund argued that it was not required to 

reimburse the employer because the payments made by the employer were 

voluntary, and also because the “old” Board had not expressly provided for 

reimbursement of the employer by the Special Fund in its decision. The Special 
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Fund’s argument was rejected by our former High Court, however, because

“reimbursement [was] required by KRS 342.120(4)[.]” Id. at 522.

The second case KIGA cites is Triangle Insulation and Sheet Metal 

Co. v. Stratemeyer, 782 S.W.2d 628 (Ky. 1990). There, our Supreme Court held 

an employer is allowed a dollar-for-dollar credit for past temporary total disability 

(“TTD”) benefits where the employer voluntarily pays an injured employee prior 

to a workers’ compensation award. It further explained:

It is important to encourage employers to make voluntary 

payments to injured employees. Employers are not 

obligated to pay benefits until a claim has been litigated 

and an award entered. Such payments are voluntary. 

The circumstances involved in each specific case must be 

carefully evaluated so that the employee is not unduly 

harmed and the employer is encouraged to make 

voluntary payments.

Id. at 630.

However, the case at bar did not involve a circumstance where an 

employer, prior to the entry of an award, voluntarily paid benefits to an injured 

employee. Rather, it involved an obligor, KIGA, contesting post-award medical 

expenses. And in that circumstance, KIGA did not have the luxury of a voluntary 

choice, but rather faced a binary one: Either pay the bills within the time allotted 

by statute; or reopen the underlying award, shoulder the burden of contesting the 

appropriateness of the bill, and risk sanctions if its contest is deemed frivolous. 
-26-

See Kentucky Associated Gen. Contractors Self-Ins. Fund v. Lowther, 330 S.W.3d 

456, 459 (Ky. 2010).

Because KIGA was not entitled to be reimbursed any amount, it 

follows that KIGA was not entitled to indirect reimbursement through a credit or 

offset, either; indeed, KIGA cites no statutory authority to the contrary, and we are 

aware of none. The ALJ committed no error in this respect.

IV. CONCLUSION

When it affirmed the ALJ’s underlying order, the Board did not 

overlook or misconstrue controlling statutes or precedent, or commit an error in 

assessing the evidence so flagrant as to cause gross injustice. See Kelly, 827 

S.W.2d at 687-88. Thus, we likewise AFFIRM.

ALL CONCUR.

BRIEF FOR APPELLANT:

Christopher M. Mayer

Thomas L. Ferreri

Louisville, Kentucky

BRIEF FOR APPELLEES DR. SAI 

GUTTI/PAIN MANAGEMENT 

CENTER AND RX 

DEVELOPMENT:

Ched Jennings

Louisville, Kentucky