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2016-SC-000217-WC
STEEL CREATIONS BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; PRESTON HIGHWAY METERED CONCRETE, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; MURRAY ELECTRONICS, BY AND THROUGH KESA, THE KENTUCKY WORKERS COMPENSATION FUND; FAMILY ALLERGY AND ASTHMA, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; AND SAMARITAN ALLIANCE, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND
ON APPEAL FROM COURT OFAPPEALS APPELLANTS

CASE NOS. 2015-CA-000218-WC, 2015-CA-000392-WC & 2015-CA-000422-WC V. WORKERS' COMPENSATION BOARD NOS. 03-WC-69871, 03-WC-73193, 04-WC-02145, 06-WC-00502, & 07-WC-80884
INJURED WORKERS PHARMACY; KEVIN KERCH; DONALD GRAMMER; KEM BARNES; RITA MERRICK; SHAUNA LITTLE F/K/A HARDIN; HON J. LANDON OVERFIELD, CHIEFADMINISTRATIVE LAW JUDGE; WORKERS' COMPENSATION BOARD; AND JACK CONWAY, ATTORNEY GENERAL AND APPELLEES·2016-SC-000222-WC
INJURED WORKERS PHARMACY; KEVIN KERCH; DONALD GRAMMER; AND KEM BARNES CROSS-APPELLANTS

ON APPEAL FROM COURT OFAPPEALS CASE NOS. 2015-CA-000218-WC, 2015-CA-000392-WC & 2015-CA-000422-WC V. WORKERS' COMPENSATION BOARD NOS. 03-WC-69871, 03-WC-73193, 04-WC-02145, 06-WC-00502, & 07-WC-80884
STEEL CREATIONS BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; PRESTON HIGHWAY METERED CONCRETE, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; MURRAY ELECTRONICS, BY AND THROUGH KESA, THE KENTUCKY WORKERS COMPENSATION FUND; FAMILY ALLERGY AND ASTHMA, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; SAMARITAN ALLIANCE, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; JACK CONWAY, ATTORNEY GENERAL; DWIGHT LOVAN, COMMISSIONER, DEPARTMENT OF WORKERS' CLAIMS; HON. J. LANDON OVERFIELD, CHIEFADMINISTRATIVE LAW JUDGE; WORKERS' COMPENSATION BOARD; RITA MERRICK; AND SHAUNA LITTLE (HARDIN) CROSS-APPELLEES

OPINION OF THE COURT BYJUSTICE KELLER AFFIRMING IN PART, VACATING IN PART, AND REMANDING

2This matter arose from five separate medicalfee-disputes filed by KESA, the KentuckyWorkers' Compensation Fund, on behalfofits insureds---'Steel Creations, Preston Highway"Metered Concrete, Murray Electronics, Family _Allergy and Asthma, and Samaritan Alliance. The disputes were filed against the Injured Workers'Pharmacy (IWP) and the insureds' employees/former employees-Kevin Kerch, Donald Grammer, Kem Barnes, Rita Merrick, and ShaunaLittle (Hardin), all ofwhom had their prescriptions filled by IWP. This litigation has involved three primaryissues: (1) whether a pharmacy/pharmacistis a medical provider; (2) whether an injured worker is entitled to choose which pharmacy he or she uses to fill prescriptions or whether that "choice" belongs to the employer or its insurer; and (3) how to interpret the pharmacyfee schedule. The ChiefAdministrative LawJudge (CAW) found that a pharmacy/pharmacistis a medical provider, which entitles

an injured worker to choose where to have his orher prescriptions filled. The CAW also found the pharmacyfee schedule is based on the amount a pharmacistpays a wholesaler for medication, and that IWP is entitled to interest on anyunderpayment by KESA. Finally, the CAW found that KESA had brought its medical fee disputes "withoutreasonable ground and without reasonable medical or factual foundation." Therefore, the CAW ordered KESA to pay the entire cost ofthe proceedings to IWP, Kem Barnes, Kevin Kerch, and Donald Grammer.1 The Workers' Compensation Board (the Board) reversed the

1 It appears that ShaunaLittle (Hardin) did notparticipatein the litigation. Itis unclearwhy .the CAW did not award costs to RitaMerrick. 3CAW's award ofcosts but otherwise affirmed. The Court ofAppeals affirmed the Board. For the following reasons, we affirm in part, vacate in part, and remand. I. BACKGROUND. The factual bases for the underlying individual claims are not disp<?sitive ofthis appeal. However, they bear mentioning and we briefly summarize each claim below. Before doing so, we note that the underlying five claims were not consolidated butwere assigned to the CAW andjoined for litigation purposes. Because the claims were notconsolidated, the parties filed essentiallythe same evidence in each ofthe individual claims.2 We address thatjointlyfiled evidence separately after our summaryofthe individual claims. A. Rita Merrick Merrick, who worked for FamilyAllergy andAsthmaAssociates, suffered
a work-related back injury on December 10, 2003. She subsequently underwent lumbar spine surgery and anAdministrative Law Judge (AW) awarded her medical expense benefits and income benefits based on a 26.455 permanent disability rating with entitlement to the three times multiplier pursuant to Kentucky Revised Statute (KRS) 342.730(1)(c)l. Following the_ AW's award, the parties filed several motions to reopen, culminating in the motion KESA filed on March 31, 2010, which is the subject ofthis appeal.

2 We note that several depositions were filed.only inthe Kevin Kerch claim. However, theparties and the CAWtreatedthese depositions as applicable to all ofthe claims. We do so as well. 4In its motion, KESA stated thatithad provided Merrick with a medical card that permitted her to "conveniently purchase prescription drugs atthe local pharmacies at a contracted price." KESA also stated thatithad advised Merrick that the medical cardwas provided through a program administered by M. Joseph Medical (M. Joseph) and that KESA would only pay prescription bills submitted through the M. Joseph program. According to KESA, it had an agreement with M. Joseph which enabled KESA to reimburse Merrick's pharmacy "ata potentially lowerprice than what is required in the administrative regulation's fee schedule for prescription drugs." KESA noted thatMerrick was not getting herprescriptions filled through the M. Joseph program butwas gettingthem filled through IWP. KESA sought an orderrequiring Merrick to participate in the M. Joseph program. In herresponse, Merrick stated that she had difficulty gettingher prescriptions timely filled when going through KESA or a KESA required pharmacy. However, she experienced no such problems when gettingher prescriptions filled through IWP. TheAW granted KESA's motion and reopened Merrick's claim. During the course ofthe litigation, Merricktestified that, when she presented a prescription at a KESA approved pharmacy, she had to wait while the .pharmacistobtained authorizationfrom KESA to fill it. This often resulted in multiple trips t_o the pharmacy, phone calls to the ad~uster at KESA, and delays in getting her prescriptions filled thatcould extend to several days. As a 5result, Merrick contacted her attorney, who referred her to IWP. Once.Merrick switched to IWP, she began gettingherprescriptions through the mail, and she did not experience any delays. B. Donald Grammer Grammer suffered a neck injurywhile working for Preston Highway Metered Concrete. He underwent a two-level cervicalfusion and the ALJ awarded medical expense benefits andincome benefits based on a 35% permanentimpairmentrating enhanced bythe three times multiplierin KRS 342.730(1)(c)l. Citing the same reasons it cited.in Merrick's claim, KESA filed

a motion to reopen Grammer's claim to contesthis use ofIWP to fill his prescriptions. The AW granted KESA's motion, and during the course ofthe subsequentlitigation, Grammertestified thathe switched to IWP to fill his



### .. prescriptions because he had experienced delays when using a KESA-preferred pharmacy. As did Merrick, Grammer testified that he often had to waitto get his prescriptions filled because the KESA-preferred pharmacisthad to get authorization, a delay he did not experience with IWP. 

### C. Shauna Little (Hardin) Little, a registered nurse, suffered a work-related ·neck injury and underwent a two-level cervical discectomy and fusion. An ALJ awarded_Little medical expense benefits and income benefits based on a 27% permanent impairmentrating enhanced bythe three times multiplierin KRS 342.730(1)(c) 1. Threeyears after the AW rendered the opinion, KESA filed a motion to reopen Little's claim to contestmedical expenses citing .the same 6reasons it cited in the Merrick and Grammer claims. TheAW granted KESA's motion but Little, who failed to appear ather deposition and who filed no evidence, did not actively participate in this litigation. D. KemBames Barnes suffered a work-related low backinjury and settled his claim for a lump sum based on a 5% permanentimpairmentrating. The settlement provided thatBarnes's employerwould remain liable for medical expenses. Slightly less than fouryears after the settlement, KESA filed a motion to reopen Barnes's claim citing the same reasons itcited in the Little, Merrick, and Grammer claims. The AW granted KESA's motion, and Barnes testified about the difficulties he had getting his prescriptions filled before he switched to IWP. E. Kevin Kerch Kerch suffered a work-related left upper extremityinjuryin July 2007. In February2009, the parties settled Kerch's claim based on a 24% permanent impairmentrating and provided that Kerch's employerwould remain liable for medical expense benefits. Approximately a yearlater, KESA filed a medical fee dispute contesting Kerch's use ofIWP to fill his prescriptions, which the AW granted. As did the others, Kerch testified aboutthe difficulties he had getting his prescriptions filled at the KESA preferred pharmacy. F. Common elements to all claims. In.further supportofits position onreopening, KESA stated it had concluded thatithad the rightto directthe claimants to a pharmacy because KRS 342.020 did not provide the option for claimants to make that choice. In 7support ofthatconclusion, KESA attached an opinion from the Attorney General given in response to a requestfrom state SenatorTomJensen. In that opinion, the Attorney General set out the following facts as presented by SenatorJensen: (1) some physicians required their workers' cC>mpensation patients to use IWP; (2) IWP charged insurers "the full fee schedule, which is generally 25% greater" than whatthe insurers were charged byother area

·pharmacies; and (3) IWP complained because KESA was reimbursing it at the

lower rate. In response to the Senator"s specific questions, the Attorney General noted that, while KRS 342.0011(15) lists medicines as a "medical service," the statute contains no definition for "medical provider." Because "mec:!ical services" does not appearin the contextofmedical provider choice, the Attorney General concluded that a pharmacy is not a medical provider for choice ofprovider purposes. Therefore, an employer or insurer could direct a claimantto a particular pharmacy orgroup ofpharmacies. TheAttorney General also stated that there was no case law regarding this, which ignored a Board opinion stating thatpharmacies are medical providers. Finally, the Attorney General stated that an employer or insurer could not enter into a fee agreement and force a non-party to that agreementto acceptthe agreed to fee. G. Evidence common to 

### all claims. The parties filed a substantial amount ofevidence regarding the business models ofIWP and M. Joseph; the various methods tliat arguably can be or should be used to determine the average wholesale price ofpharmaceuticals; 8and. the advantages and disadvantages to using each ofthose methods. We summarize that evidence below to the extentitis necessaryto understand the disputes among the parties. lWP has a warehouse and retail outletin Andover, Massachusetts. Itfills prescriptions, in pertinentpart, for injuredworkers and primarilymarkets itselfto plaintiffs' attorneys. Therefore, most ofits "referrals" are from plaintiffs' attorneys, as is the case with the five individual claimants herein. We note that, despite the statements in theAttorney General's opinion, there

was no evidence presented that any physicians required their patients to use IWP. After an injured worker enrolls with IWP and IWP receives a prescription, itverifies the authenticity ofthe prescription and fills itwithoutrequiring authorization from the insurer. IfanAW subsequently determines thatthe pres.cription was for a nonwork-related condition or otherwise is not compensable by the insurer, IWP will notbalance bill the patient butwill write offthe cost ofany non-covered medication. IWP undertakes this riskbecause itviews itselfas a patient advocate and does not wantto unnecessarily delay providing prescribed medication. IWP, which operates in a number ofstates, charges insurers for medication it dispenses pursuant to its interpretation.ofthe appropriate fee schedule. In Kentucky, IWP charges the "average wholesale price," as setforth

9in a publication known as "Medi-Span."3 IWP charges the published average wholesale price regardless ofwhatit actually pays for the medication it dispenses. M. Joseph acts as a "middle-man" between KESA and several pharmacy. benefit management companies, which act as middlemen between pharmacies and pharmaceutical manufacturers.4 Pharmacy benefitmanagement companies have 'contracts with a numbt;r ofpharmacies to provide medication to those pharmacies at an agreed to price. That price reflects the price the pharmacybenefit management companies have negotiated with the ' pharmaceutical manufacturers and includes discounts for volume as well as for manufacturer provided rebates. The pharmacies bill the pharmacy benefit management companies based on the agreed to price.

·Pllrsuant to M. Joseph's contracts with the pharmacy benefit managementcompanies, the companies bill M. Joseph for the medications that claimants ofM. Joseph clients have purchased. The pharmacy benefit managementcompanies add an "upcharge" to what the pharmacies bill before sending the bills to M. Joseph. M. Joseph then adds an "upcharge" to that amount and bills its clients.

3 It appears thatIWP mayhave used a publication known as "First Databank" at some point during the litigation. However, FirstDatabank apparently no longer publishes dataregarding average wholesale·pharmaceutical prices and IWP switched to Medi-Span. 4 Claiming thatitwas a trade secret, representatives ofM. Josephwould not identify the pharmacybenefitmanagement companies with which ithas contractual relationships. 10M. Joseph's primaryfact witness, Michael Bartlett,testified thathe did not knowhow much the pharmacy benefit managementcompani~s added as
an upcharge, and he refused 

### to testify about the amount M. Joseph added as
an upcharge claiming thatinformation is a trade secret. Furthermore, none of the witnesses could orwould testify regarding the agreed to price for medications that had been negotiated between the pharmacy benefit management companies and the pharmacies. KESA has a "hand-shake" agreementwith M. Joseph wherebyM. Joseph provides a prescription card to KESA's insureds that the insureds can use at most pharmacies in the.Commonwealth. When the insured presents the card to get a prescription filled, the pharmacist canverify ifthe prescription is authorized.5 Ifit is not, the pharmacistc_alls a representative from M. Joseph who then contacts an adjuster at KESA. The adjuster will then either authorize the pharmacistto fill the prescription or advise the pharmacistand the insured that additional information is needed. Itis this authorization procedure that

causes the delays aboutwhich the named claimants complained. M. Joseph markets itselfby representing thatit can provide prescription medications to insureds at an average costthatis approximately 25% below the average wholesale price. Itis unclear whetherM. Joseph uses a published average wholesale price when making this assertion; however, it appears thatis the case. KESA filed int!Yevidence spreadsheets showing the difference

5 Itisunclear ifa pharmacist is required to obtain authorization; however, itis undisputed thatmost ifnot all pharmacists, with the exception ofthe pharmacists at IWP, will notfill a prescriptionwithoutreceiving authorization. 11between whatM. Joseph charges for prescriptions and whatIWP charges. For

some medications the difference is as much as several hundred dollars and for others there is little to no difference. In addition to the preceding, the parties filed voluminous testimony about the difference between the published average wholesale price and the actual average wholesale price. According to KESA's expert witness, the published average wholesale price is provided to the publishers by the pharmaceutical manufacturers and has no relationship to what wholesalers actually charge. A more accurate measure, although it is not exact either, is the published wholesale acquisition cost, which is a reflection ofwhat the

. wholesalers pay the.manufacturers. However, this number, like the number .for the published average wholesale price, is also provided by the manufacturers. It appears that most statesuse the published average wholesale price and/or the wholesale acquisition cost as a starting pointfor pricing purposes butdo not explicitly adopt eitherin toto. Neither party filed any evidence regarding the actual wholesale price IWP pays for the medications it dispenses. However, we note that, for nearly two and a halfyears ofthis litigation, KESA did not challenge IWP's charges as being in excess ofthe prescription fee schedule. In fact, KESA did not officially list that as an issue until September 7, 2012, which was after the vast majority ofthe depositions had been taken and filed.6

6 The only arguably dispositive deposition taken after September7, 2012 was anupdate deposition ofKESA's expert, Dr. Rost

.

.12In a rare step in workers' compensation claims, KESAjoined the. Commissioner ofthe Department ofWorkers' Claims (the Department) as a party. The Commissioner testified that 803 KAR 25:092, which is commonly known as the pharmacy fee schedule, controls how prescription fees are charged and it "speaks for itself." The average wholesale price is "the average wholesale price ofa given drug at a specific point in time." The Commissioner stated thathe did not know what proofthe partieswould need to putforth to establish what the average wholesale price is; however, he noted that the Department had not adopted any pricing publications. Determiningwhatprice meets the regulatory definitions would be a matterfor an ALJ, not the Commissioner. Finally, the Commissioner noted that, years priorto the Attorney General's opinion, the Board had determined that a pharmacy is a medical provider, and the Departmentfollows Board opinions until an appellate court rules to the contrary. H. The ALJ's Opinion. Following a number ofpetitions for reconsideration, the AW ultimately made five findings/decisions that are pertinent to this appeal. First, he found that a pharmacy is a medical provider, which entitles a claimantto choose which pharmacy to use. Second, he found that 803 KAR 25:092 §§ 1 and 2 neither mandate nor exclude consideration ofa published average wholesale price, and they should be interpreted as follows: (a) Pursuant to 803 KAR 25:092§1(6), "wholesale price" is the average wholesale price drugstores (or any other pharmaceutical 13providers) payto wholesalers when purchasingpharmaceuticals for distribution in filling prescriptions for customers. (b) A pharmacistfilling prescriptionsfor an injured worker which requires dispensing brand name drugs for a workers[sic] compensation injuryis entitled to be reimbursed in an amount equal to the wholesale price as determined pursuant to 803 KAR 25:092§1(6) the pharmacistpaid for the drug dispensed plus a five dollar ($5.00) fee and any applicable federal or state tax or assessment.

(c) A pharmacistfilling prescriptions for an injured worker for a workers [sic] compensation injurywith drugs which are not brand name drugs is entitled to be reimbursed in an amountequal to the wholesale price as determined pursuant to 803 KAR 25:092§1(6) the pharmacistpaid for the lowest price drug which is therapeutically equivalentto the druguse[d] to fill the prescription which the pharmacist has in stock in his establishment at the time he fills the prescription, plus a five dollar ($5.00) dispensing fee and any applicable federal or state tax or assessment. (Emphasis added.) Third, the CAW found that KESA "brought and prosecuted [the medical fee disputes] withoutreasonable ground and without reasonable medical or factual foundation" and he assessed the entire costofthe proceedings to the claimants. Fourth, the CAW ordered KESA to "pay all contested pharmaceutical bills

... pursuant to KRS 342.020 and the pertinent regulations." Finally, the AW found thatIWP is notentitled to interest on any unpaid or overdue balances itclaims. Both parties appealed to the Board. KESA argued, in pertinentpart, that: the CAW correctly found that a pharmacy should be paid based on the actual average wholesale price the pharmacy paid for dispensed medication; the CAW incorrectly found that the regulation does notrequire exclusion ofthe

use ofpublil:ihed average wholesale priceswhen calculatingthe amount a 14pharmacy is owed; the CAW erred in assessing costs; and the CAW erred in finding a pharmacy is a medical provider. IWP argued thatthe CAW erred when he failed to award interest on any pastdue payments. The Board agreed with KESA thatthe award of sanctions was not justified, but otherwise affirmed the CAW. Both parties sought review

## qy the Court ofAppeals, and the Court ofAppeals affirmed the Board. In doing so, the Court ofAppeals erroneously stated thatthe CAW had ordered KESA to pay IWP based on the published average wholesale price thatIWP had charged. This misstatement by the Court ofAppeals appears to be fueling, in large part,

· KESA's appeal to ~is Court. As noted above, the parties raise essentiallythe same issues theyhave argued throughout this lil}gation. We address those issues below. II. STANDARD OF REVIEW. The issues presented by the parties primarily require us to interpret statutory and regulatory provisions, which we review 

### de novo. Saint Joseph Hosp. v. Frye, 415 S.W.3d 631, 632 (Ky. 2013). However, we defer to the CAW with regard to factual determinations and, when the issues involve mixed questions of fact and law, we have greater latitude to determine if the underlying opinion is supported by probative evidence. 

### See Purchase Transp. Services v. Estate ofWilson, 39 S.W.3d 816, 817-18 (Ky. 2001). III. ANALYSIS. A. The CALJ correctly determined that a pharmacy is a medical provider.

15KESA argues thatworkers' compensation claimants are not entitled to choose a pharmacybecause a pharmacyis not a medical provider. The CALJ, the Board, and the Court ofAppeals found to the contr~. To resolve this issue we must look to two statutory provisions, KRS 342.020(1) and KRS 342.0011(15). KRS 342.020(1) provides that: In addition to all other compensation.provided in this chapter, the employer shall pay for the cure and relieffrom the effects of

### an injury or occupational disease the medical, surgical, and hospital treatment, includingnursing, medical, and surgical supplies and appliances, as may reasonably be required atthe time ofthe injury and thereafter during disability, or as may be required for the cure and treatment ofan occupational disease. The employer's obligation to pay the benefits specified in this section shall continue for so long as the employee is disabled regardless ofthe duration ofthe employee's income benefits. 

### In the absence of designation of a managed healthcare system by the employer, the employee may select medicalproviders to treat his injury or occupational disease. Even ifthe employerhas designated a managed health care system, the injured employee may elect to continue treatingwith a physician who provided emergency medical care or treatment to the employee. The employer, insurer, or payment obligor acting on behalfofthe employer, shall make all payments for services rendered to an employee directly to the provider ofthe services within thirty (30) days ofreceipt ofa statementfor services. The comrμissioner shall promulgate administrative regulations establishing conditions under which the thirty (30) day period for paymentmaybe tolled. The proviq.er of medical services shall submitthe statementfor services within forty-five (45) days ofthe day treatmentis initiated and every fortyfive (45) days thereafter, ifappropriate, as long as medical services are rendered. Except as provided in subsection (4) ofthis section, in no event shall a medical fee exceed the limitations ofan adopted medical fee schedule or otherlimitations contained in KRS 342.035, whichever is lower. The commissionermay promulgate administrative regulations establishing the form and content ofa statementfor services and procedures by which disputes relative to the necessity, effectiveness, frequency, and cost of services maybe resolved. (Emphasis added.) 16There is no definition of"medical provider" in KRS Chapter 342. However, KRS 342.0011(15) defines "medical services" as: "medical, surgical, dental, hospital, nursing, and medical rehabilitation services, 

### medicines, and fittings for artificial or prosthetic devices." (Emphasis added.) As.did the Court
, ofAppeals, we hold thatthe plain meaning ofthese two statutes is that a

- medical provider is one who provides medical services. Since medicines are

"medical services," and a pharmacist provides that medical service, a pharmacistis a medical provider. Therefore, absent an employer's participation in a managed health care system, claimants are free to choose which pharmacy to use. We note KESA's argument that such a holdingwill "opena door through which othercommercial operators
... could pass." However, ifthat door has been opened, itis the General Assembly that opened it, not the Court. Furthermore, to the.extentthose other commercial operators are subjectto the appropriate fee schedule, we fail to see how KESA would be harmed by a claimant exercising that choice. 

### B. The CALJ correctly interpreted the "pharmacy fee schedule." The workers' compensation "pharmacy fee schedule" is set forth in 803 KAR 25:092. We put thatphrase in quotation marks because this fee schedule is not what we typically think ofas a fee schedule. It does not set out specific

17reimbursement rates for medications and itdoes not adopt any specific p-y.blished schedule ofreimbursement rates.7 Rather itprovides as follows:

. Any duly licensed pharmacist dispensingpharmaceuticals

. pursuant to KRS Chapter 342 shall be entitled to be reimbursed

## m the amount ofthe equivalent drug productwholesale price ofthe lowest priced therapeutically equivalent drug the dispensing pharmacist has in stock, at the time ofdispensing, plus a five (5) dollar dispensingfee plus any applicable federal or state 

### tax or assessment. · 803 KAR 25:092 § 2. "Wholesale price• is defined as "the average wholesale price charged by wholesalers at a given time." 803 KAR 25:092 § 1(6). The CAW interpreted the fee schedule as entitling a pharmacistto reimbursement based on the average wholesale price the pharmacistpaid for a given medication, plus the dispensing fee. In doing so, the CAW stated that the regulation neither adopted nor excluded the use ofa published average wholesale price guide to determine the appropriate reimbursementrate. The Board and the Court ofAppeals agreed with the CAW. KESA agrees with the CAW's interpretation ofthe regulation. However, it argues on appeal that the evidence compelled a finding that the published average wholesale price cannot be the basis for determining reimbursement rates in this case. IWP on the otherhand argues that the published average wholesale price can be used and should be used to determine the reimbursement rate. We address each argumentin turn below.

7 It appears from the evidence that the published and actual average wholesale prices ofpharmaceuticals change frequently, with thepublished guides beingupdated frequently. 18KESA is correctthatits expert testified thatpublished average wholesale prices have little to do with actual wholesale prices. However, neither that testimony nor the regulation itselfcompel the finding KESA seeks. We note that KESA's own witness testified thatIWP's prices were in keeping with the pharmacy fee schedule, testimony the CAW could have chosen to believe. Furthermore, although M. Joseph claimed thatit obtained medication for KESA at an average of25% less than the· average wholesale price, spreadsheets filed by KESA show that the M. Joseph andIWP prices for some medications were the same. Thus, KESA's proofwas, at leastin part, inconsistentwith its argument. Finally, ifthe Department ofWorkers' Claims had wanted to exclude the use ofpublished average wholesale prices, it could have specifically stated as much in its regulation. As to IWP's argument, the regulation does not·mandate or even suggest thatpublished average wholesale prices should be used to determine the appropriate reimbursement rate. Furthermore, IWP's argument to the contrary notwithstanding, the Commissioner testified that the Department has not taken the position that a published price controls the reimbursementprice. Therefore, IWP's argument that those guides should be the sole arbiter of reimbursementrates is without merit. So, how should pharmacyreimbursement rate disputes be resolved? The
same way all other disputesunder KRS 342 are resolved. The parties present their proof, and the AW makes a determination. The AW may, but is not

· required to, take into consideration the published average wholesale price. The
19ALJ may also take into consideration the wholesale acquisition price, which has some connection to what a wholesaler would charge a retailer. However, unless theALJ determines that the published average wholesale price orthe

. wholesale acquisition price is the actual average wholesale price the pharmacist paid, the AW may not simply adopt eitherofthose pricing guides 

### in toto.s The AW must determine the actual wholesale price the pharmacist paid, which may or may nothave a relevant 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 approp]'.iate reimbursement rate is underthe regulation. We recognize that this could, as lWP argues, put a considerable strain on the already busyAWs. That may or may not be the case. However, ifthat occurs, the Department can take the appropriate steps to remedythe 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 thatIWP charged. He ordered KESA to reimburse lWP pursuant to the statute and regulations, which he correctly interpreted to be the actual average wholesale price IWP paid. However, the

s Forthe sake ofclarity, we are not stating that any ofthe pricing guides are per seadmissible. Any such guide must be admissible pursuantto 803 KAR 25:010 Section 14, and the AWis free to exercise his or her discretion in either admittingor excluding a proffered pricing guide within the confines ofthatregulation. Based on the record before us in this case, it appears thatthe published average wholesale price guides and the wholesale acquisition price guide maynotbe particuiarlyrelevant. · However, none ofthe parties have soughtto introduce into evidence any ofthose
·pricing guides. Ifa partyattempts to do so andthere is an objection, the AWmust undertake the appropriate analysis before admitting or excluding anyprofferedpricing guides. 

### 20CAW did notmake any specific findings regarding the actual average wholesale price IWP paid for_the medications it dispensed. KESA's argument thatits paymentto IWP based on the M. Joseph agreement satisfies the regulation is without merit. As we understand this argument, KESA believes that the pharmacy benefitmanagement companies with which ithas contractual relationships have established the average wholesale price through their contractswith the pharmacies. Thus, bypaying IWP the M. Joseph price, KESA is payingthe actual average wholesale price. However, the regulation states thatreimbursement is based onwhat the dispensingpharmacy (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 AW with instructions to make findings regardingwhatIWP's actual average wholesale price was for the medications atissue. Finally, we note that 803 KAR 25:092 § 3(4) provides that "[a]ny insurance carrier, self-insured employer or group self-insured employermay enter into an agreement with any pharmacy to provide reimbursement at a lower amount thanthat required in this administrative_regulation." Thus, there is no prohibition against the arrangement KESA has with M. Joseph and there would be no prohibition against KESA enteringinto a similar arrangementwith IWP. However, KESA cannotunilaterallyimpose its M. Joseph agreement on IWP.

21

### ' C. The CAW correctly found that KESA is not liable for interest on any past due amounts it owes IWP. On remand, the AW mayfind that KESA does not owe IWP any additional sums. However, because the AW could find otherwise, the issue of interest on past due benefits may arise. Therefore, we address it. "Itis fundamental that administrative agencies are creatures ofstatute and mustfind within the statute warrantfor the exercise ofany authority which they claim." Dept. forNat. Res. andEnvtl. Prot. v. Stearns Coal & Lumber Co., 563 S.W.2d 471, 473 (Ky. 1978). KRS 342.040 provides for the assessment ofinterest on past due income benefits; however, there is no corollaryfor payment ofinterest on past due medical expense benefits. We presume that the GeneralAssembly acted intentionallywhen itprovided for the payment ofintereston past due income benefits while omitting the payment of

. . interestfrom past due medical expense benefits. See Turner v. Nelson, 342 S.W.3d 866, 873 (Ky. 2011). Therefore, we agree withthe CAW, the Board, and the CourtofAppeals that !WPis not entitled to anyinterest on anypast due payments. 

### D. The Boardcorrectly reversed the CAW's assessment ofcosts. The CAW found that theAttorney General's opinion did notprovide a reasonable legal or factual basis for KESA's decision to direct the named claimants to use the M. Joseph program to obtain their medications. In doing so, the CAW noted thatthe Attorney General's opinion: (1) stated thatthe claimants did not have the rightto choose theirpharmacy, but it did not state that KESA had the rightto make thatchoice; (2) was based in part on the 22ipcorrect assertion thatphysicians were directingtherrpatients to IWP; and (3)

ran counter to a Board opinion. Based primarilyon the preceding findings, the CAW ordered KESA to paythe entire cost ofthe proceedings. The Board found thatthe Attorney General's opinion was sufficient to support KESA's actions. The Court ofAppeals agreed with the Board. We agree with the ultimate decisions bythe Board and the Court ofAppeals but for somewhat different

reasons. KRS 342.310 provides, in pertinent part, that anAW "may assess the whole cost ofthe proceedings" ifhe determin~s thatthe proceedings were "brought, prosecuted, or defended withoutreasonable ground." Whether to
assess such cost is within the AW's discretion. Richey 

### v. PerryArnold, Inc., 391 S.W.3d 705, 713 (Ky. 2012). Ifthe only issue before the CAW was whether KESA could direct the claimants to use KESA approved pharmacies, we might be convinced thatthe Board and the Court ofAppeals.overstepped their bounds. Itwas within the CAW's discretion to find thatthe opinion ofthe Attorney General was not a sufficient basis to support KESA's action, particularlyin the face ofa Board opinion to the contrary. However, as the litigation progressed, the interpretation ofKAR 25:092 became an issue as did the appropriateness of IWP's charges·. This was an issue offirst impression, which KESA had a reasonable legal and·factual basis to challenge. Because the CAW did not factor this issue into his decision to assess costs, he abused his discretion.

23Therefore, we affirm the Court ofAppeals andthe Board in their reversal ofthe CAW's assessment ofthe cost ofthe proceedings against KESA. IV. CONCLUSION. For the foregoing reasons, we affirm the CourtofAppeals opinion regarding the assessment ofinterest and sanctions. We also affirm the Court ofAppeals that a pharmacyis a medical provider. However, we vacate the remainder ofthe Court ofAppeals opinion and remand because the CAW did not make a determination regardingthe actual average wholesale price paid by IWP. On remand, the AW, or CAW ifappropriate, must determine whatIWP's actual average wholesale price was for the contested medications. The AW, or CAW ifappropriate, mayreopen proofifhe or she deems itnecessaryto do so. · Minton, C.J.; Cunningham, Hughes, Keller, Venters, JJ., and Special Justices David Samford and Kimberly Mccann, sitting. All concur. VanMeter and Wright, JJ., not sitting.

24COUNSEL FORAPPELLANTS/CROSS-APPELLEES, STEEL CREATIONS, BY AND THROUGH KESA, THE KENT{lCKY WORKERS' COMPENSATION FUND; MURRAY ELECTRONICS, BY AND THROUGH KESA, THE.KENTUCKY WORKERS' COMPENSATION FUND; FAMILY ALLERGY AND ASTHMA, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND; AND SAMARITAN ALLIANCE, BY AND THROUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND: Joseph L. Ardery Griffin Teny Sumner Frost BrownTodd, LLC James Gordon Fogle Fogle Keller Purdy, PLLC
COUNSEL FORAPPELLANT/CROSS-APPELLEE, PRESTON HIGHWAY METERED CONCRETE, BY AND THOUGH KESA, THE KENTUCKY WORKERS' COMPENSATION FUND:

. Joseph L. Ardery Griffin Teny Sumner FrostBrownTcidd, LLC James Gordon Fogle Fogle Keller Purdy, PLLC Natalie Laszkowski Fulton- & Devlin, LLC
COUNSEL FORAPPELLEE/CROSS-APPELLANT, INJURED WORKERS' PHARMACY: Charles E. Jennings Eric M. Lamb Lamb & Lamb, PSC
COUNSEL FORAPPELLEES/CROSS-APPELLANTS, KEVIN KERCH AND DONALD GRAMMER: Charles E. Jennings



### 25COUNSEL FOR APPELLEE/CROSS-APPELLANT, KEM BARNES: Jeffery Roberts Roberts Law Office
COUNSEL FORAPPELLEE/CROSS-APPELLEE, RITA MERRICK: McKinnleyMorgan Morgan Collins & Yeast
COUNSEL FORAPPELLEE/CROSS-APPELLEE, SHAUNA LITTLE F/K/A HARDIN: Paul Guthrie
COUNSEL FORAPPELLEE/CROSS-APPELLEE, JACK CONWAY, ATTORNEY GENERAL: Andy Beshear Attorney General ofKentucky James Robert Carpenter AssistantAttorney General
COUNSEL FORAMICUS CURIAE, INSURANCE INSTITUTE OF KENTUCKY: Kenneth J. Dietz Lucas & Dietz, PLLC
COUNSEL FORAMICUS CURIAE, KENTUCKY ASSOCIATION OF GENERAL CONTRACTORS: Gregory Lonzo Little Ferreri Partners PLLC

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