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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 OF APPEALS 

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, CHIEF ADMINISTRATIVE 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 OF APPEALS 

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, CHIEF ADMINISTRATIVE LAW 

JUDGE; WORKERS' COMPENSATION 

BOARD; RITA MERRICK; AND SHAUNA 

LITTLE (HARDIN) 

CROSS-APPELLEES 

OPINION OF THE COURT BY JUSTICE KELLER 

AFFIRMING IN PART, VACATING IN PART, AND REMANDING 

2 
This matter arose from five separate medical fee-disputes filed by KESA, 

the Kentucky Workers' Compensation Fund, on behalf of its 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 

Shauna Little (Hardin), all of whom had their prescriptions filled by IWP. This 

litigation has involved three primary issues: (1) whether a 

pharmacy/ pharmacist is 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 pharmacy fee schedule. The Chief Administrative Law Judge 

(CAW) found that a pharmacy/pharmacist is a medical provider, which entitles 

an injured worker to choose where to have his or her prescriptions filled. The 

CAW also found the pharmacy fee schedule is based on the amount a 

pharmacist pays a wholesaler for medication, and that IWP is entitled to 

interest on any underpayment by KESA. Finally, the CAW found that KESA 

had brought its medical fee disputes "without reasonable ground and without 

reasonable medical or factual foundation." Therefore, the CAW ordered KESA 

to pay the entire cost of the proceedings to IWP, Kem Barnes, Kevin Kerch, and 

Donald Grammer.1 The Workers' Compensation Board (the Board) reversed the 

1 It appears that Shauna Little (Hardin) did not participate in the litigation. It is 

unclear why .the CAW did not award costs to Rita Merrick. 

3 
CAW's award of costs but otherwise affirmed. The Court of Appeals 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 

of this 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 but were assigned to the CAW and joined for litigation purposes. 

Because the claims were not consolidated, the parties filed essentially the same 

evidence in each of the individual claims.2 We address that jointly filed 

evidence separately after our summary of the individual claims. 

A. Rita Merrick 

Merrick, who worked for Family Allergy and Asthma Associates, suffered 

a work-related back injury on December 10, 2003. She subsequently 

underwent lumbar spine surgery and an Administrative 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 of this appeal. 

2 We note that several depositions were filed.only in the Kevin Kerch claim. 

However, the parties and the CAW treated these depositions as applicable to all of the 

claims. We do so as well. 

4 
In its motion, KESA stated that it had provided Merrick with a medical 

card that permitted her to "conveniently purchase prescription drugs at the 

local pharmacies at a contracted price." KESA also stated that it had advised 

Merrick that the medical card was 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 "at a potentially lower price than what 

is required in the administrative regulation's fee schedule for prescription 

drugs." KESA noted that Merrick was not getting her prescriptions filled 

through the M. Joseph program but was getting them filled through IWP. 

KESA sought an order requiring Merrick to participate in the M. Joseph 

program. 

In her response, Merrick stated that she had difficulty getting her 

prescriptions timely filled when going through KESA or a KESA required 

pharmacy. However, she experienced no such problems when getting her 

prescriptions filled through IWP. The AW granted KESA's motion and 

reopened Merrick's claim. 

During the course of the litigation, Merrick testified that, when she 

presented a prescription at a KESA approved pharmacy, she had to wait while 

the .pharmacist obtained authorization from 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 that could extend to several days. As a 

5 
result, Merrick contacted her attorney, who referred her to IWP. Once.Merrick 

switched to IWP, she began getting her prescriptions through the mail, and she 

did not experience any delays. 

B. Donald Grammer 

Grammer suffered a neck injury while working for Preston Highway 

Metered Concrete. He underwent a two-level cervical fusion and the ALJ 

awarded medical expense benefits and income benefits based on a 35% 

permanent impairment rating enhanced by the three times multiplier in 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 contest his use of IWP to fill his 

prescriptions. The AW granted KESA's motion, and during the course of the 

subsequent litigation, Grammer testified that he 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 wait to get 

his prescriptions filled because the KESA-preferred pharmacist had 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 

impairment rating enhanced by the three times multiplier in KRS 

342. 730(1)(c) 1. Three years after the AW rendered the opinion, KESA filed a 

motion to reopen Little's claim to contest medical expenses citing .the same 

6 
reasons it cited in the Merrick and Grammer claims. The AW granted KESA's 

motion but Little, who failed to appear at her deposition and who filed no 

evidence, did not actively participate in this litigation. 

D. KemBames 

Barnes suffered a work-related low back injury and settled his claim for a 

lump sum based on a 5% permanent impairment rating. The settlement 

provided that Barnes's employer would remain liable for medical expenses. 

Slightly less than four years after the settlement, KESA filed a motion to reopen 

Barnes's claim citing the same reasons it cited 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 extremity injury in July 2007. 

In February 2009, the parties settled Kerch's claim based on a 24% permanent 

impairment rating and provided that Kerch's employer would remain liable for 

medical expense benefits. Approximately a year later, KESA filed a medical fee 

dispute contesting Kerch's use of IWP to fill his prescriptions, which the AW 

granted. As did the others, Kerch testified about the difficulties he had getting 

his prescriptions filled at the KESA preferred pharmacy. 

F. Common elements to all claims. 

In.further support of its position on reopening, KESA stated it had 

concluded that it had the right to direct the claimants to a pharmacy because 

KRS 342.020 did not provide the option for claimants to make that choice. In 

7 
support of that conclusion, KESA attached an opinion from the Attorney 

General given in response to a request from state Senator Tom Jensen. In that 

opinion, the Attorney General set out the following facts as presented by 

Senator Jensen: (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 what the insurers were charged by other 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 appear in the context of medical provider choice, the 

Attorney General concluded that a pharmacy is not a medical provider for 

choice of provider purposes. Therefore, an employer or insurer could direct a 

claimant to a particular pharmacy or group of pharmacies. The Attorney 

General also stated that there was no case law regarding this, which ignored a 

Board opinion stating that pharmacies 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 agreement to accept the agreed to fee. 

G. Evidence common to all claims. 

The parties filed a substantial amount of evidence regarding the business 

models of IWP and M. Joseph; the various methods tliat arguably can be or 

should be used to determine the average wholesale price of pharmaceuticals; 

8 
and. the advantages and disadvantages to using each of those methods. We 

summarize that evidence below to the extent it is necessary to understand the 

disputes among the parties. 

lWP has a warehouse and retail outlet in Andover, Massachusetts. It fills 

prescriptions, in pertinent part, for injured workers and primarily markets 

itself to plaintiffs' attorneys. Therefore, most of its "referrals" are from 

plaintiffs' attorneys, as is the case with the five individual claimants herein. 

We note that, despite the statements in the Attorney 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, 

it verifies the authenticity of the prescription and fills it without requiring 

authorization from the insurer. If an AW subsequently determines that the 

pres.cription was for a nonwork-related condition or otherwise is not 

compensable by the insurer, IWP will not balance bill the patient but will write 

off the cost of any non-covered medication. IWP undertakes this risk because 

it views itself as a patient advocate and does not want to unnecessarily delay 

providing prescribed medication. 

IWP, which operates in a number of states, charges insurers for 

medication it dispenses pursuant to its interpretation.of the appropriate fee 

schedule. In Kentucky, IWP charges the "average wholesale price," as set forth 

9 
in a publication known as "Medi-Span."3 IWP charges the published average 

wholesale price regardless of what it 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 benefit management 

companies have 'contracts with a numbt;r of pharmacies to provide medication 

to those pharmacies at an agreed to price. That price reflects the price the 

pharmacy benefit 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 

management companies, the companies bill M. Joseph for the medications that 

claimants of M. Joseph clients have purchased. The pharmacy benefit 

management companies 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 that IWP may have used a publication known as "First Databank" 

at some point during the litigation. However, First Databank apparently no longer 

publishes data regarding average wholesale·pharmaceutical prices and IWP switched 

to Medi-Span. 

4 Claiming that it was a trade secret, representatives of M. Joseph would not 

identify the pharmacy benefit management companies with which it has contractual 

relationships. 

10 
M. Joseph's primary fact witness, Michael Bartlett, testified that he did 

not know how much the pharmacy benefit management compani~s added as 

an upcharge, and he refused to testify about the amount M. Joseph added as 

an upcharge claiming that information is a trade secret. Furthermore, none of 

the witnesses could or would 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" agreement with M. Joseph whereby M. 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 can verify if the prescription is 

authorized.5 If it is not, the pharmacist c_alls a representative from M. Joseph 

who then contacts an adjuster at KESA. The adjuster will then either authorize 

the pharmacist to fill the prescription or advise the pharmacist and the insured 

that additional information is needed. It is this authorization procedure that 

causes the delays about which the named claimants complained. 

M. Joseph markets itself by representing that it can provide prescription 

medications to insureds at an average cost that is approximately 25% below 

the average wholesale price. It is unclear whether M. Joseph uses a published 

average wholesale price when making this assertion; however, it appears that is 

the case. KESA filed int!Yevidence spreadsheets showing the difference 

5 It is unclear if a pharmacist is required to obtain authorization; however, it is 

undisputed that most if not all pharmacists, with the exception of the pharmacists at 

IWP, will not fill a prescription without receiving authorization. 

11 
between what M. Joseph charges for prescriptions and what IWP 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 of what 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 states use the published average 

wholesale price and/ or the wholesale acquisition cost as a starting point for 

pricing purposes but do not explicitly adopt either in 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 half years of this litigation, KESA did not challenge IWP's charges as 

being in excess of the prescription fee schedule. In fact, KESA did not officially 

list that as an issue until September 7, 2012, which was after the vast majority 

of the depositions had been taken and filed.6 

6 The only arguably dispositive deposition taken after September 7, 2012 was 

an update deposition ofKESA's expert, Dr. Rost . 

. 12 
In a rare step in workers' compensation claims, KESA joined the. 

Commissioner of the Department of Workers' 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 of a given drug at a specific point in time." The Commissioner 

stated that he did not know what proof the parties would need to put forth to 

establish what the average wholesale price is; however, he noted that the 

Department had not adopted any pricing publications. Determining what price 

meets the regulatory definitions would be a matter for an ALJ, not the 

Commissioner. Finally, the Commissioner noted that, years prior to the 

Attorney General's opinion, the Board had determined that a pharmacy is a 

medical provider, and the Department follows Board opinions until an 

appellate court rules to the contrary. 

H. The ALJ's Opinion. 

Following a number of petitions 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 claimant to choose 

which pharmacy to use. 

Second, he found that 803 KAR 25:092 §§ 1 and 2 neither mandate nor 

exclude consideration of a 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 

13 
providers) pay to wholesalers when purchasing pharmaceuticals for 

distribution in filling prescriptions for customers. 

(b) A pharmacist filling prescriptions for an injured worker which 

requires dispensing brand name drugs for a workers[sic] 

compensation injury is entitled to be reimbursed in an amount 

equal to the wholesale price as determined pursuant to 803 KAR 

25:092§1(6) the pharmacist paid for the drug dispensed plus a five 

dollar ($5.00) fee and any applicable federal or state tax or 

assessment. 

(c) A pharmacist filling prescriptions for an injured worker for a 

workers [sic] compensation injury with drugs which are not brand 

name drugs is entitled to be reimbursed in an amount equal to the 

wholesale price as determined pursuant to 803 KAR 25:092§1(6) 

the pharmacist paid for the lowest price drug which is 

therapeutically equivalent to the drug use[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] without reasonable ground and without reasonable medical or 

factual foundation" and he assessed the entire cost of the 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 that IWP is not entitled to interest on any 

unpaid or overdue balances it claims. 

Both parties appealed to the Board. KESA argued, in pertinent part, 

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 not require exclusion of the 

use of publil:ihed average wholesale prices when calculating the amount a 

14 
pharmacy is owed; the CAW erred in assessing costs; and the CAW erred in 

finding a pharmacy is a medical provider. IWP argued that the CAW erred 

when he failed to award interest on any past due payments. 

The Board agreed with KESA that the award of sanctions was not 

justified, but otherwise affirmed the CAW. Both parties sought review qy the 

Court of Appeals, and the Court of Appeals affirmed the Board. In doing so, 

the Court of Appeals erroneously stated that the CAW had ordered KESA to 

pay IWP based on the published average wholesale price that IWP had charged. 

This misstatement by the Court of Appeals appears to be fueling, in large part, 

· KESA's appeal to ~is Court. 

As noted above, the parties raise essentially the same issues they have 

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 of Wilson, 39 S.W.3d 816, 817-18 (Ky. 2001). 

III. ANALYSIS. 

A. The CALJ correctly determined that a pharmacy is a medical 

provider. 

15 
KESA argues that workers' compensation claimants are not entitled to 

choose a pharmacy because a pharmacy is not a medical provider. The CALJ, 

the Board, and the Court of Appeals 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 relief from the effects of an 

injury or occupational disease the medical, surgical, and hospital 

treatment, including nursing, medical, and surgical supplies and 

appliances, as may reasonably be required at the time of the injury 

and thereafter during disability, or as may be required for the cure 

and treatment of an 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 of the 

duration of the employee's income benefits. In the absence of 

designation of a managed health care system by the employer, the 

employee may select medical providers to treat his injury or 

occupational disease. Even if the employer has designated a 

managed health care system, the injured employee may elect to 

continue treating with a physician who provided emergency 

medical care or treatment to the employee. The employer, insurer, 

or payment obligor acting on behalf of the employer, shall make all 

payments for services rendered to an employee directly to the 

provider of the services within thirty (30) days of receipt of a 

statement for services. The comrμissioner shall promulgate 

administrative regulations establishing conditions under which the 

thirty (30) day period for payment may be tolled. The proviq.er of 

medical services shall submit the statement for services within 

forty-five (45) days of the day treatment is initiated and every fortyfive (45) days thereafter, if appropriate, as long as medical services 

are rendered. Except as provided in subsection (4) of this section, 

in no event shall a medical fee exceed the limitations of an adopted 

medical fee schedule or other limitations contained in KRS 

342.035, whichever is lower. The commissioner may promulgate 

administrative regulations establishing the form and content of a 

statement for services and procedures by which disputes relative to 

the necessity, effectiveness, frequency, and cost of services may be 

resolved. 

(Emphasis added.) 

16 
There 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 , 

of Appeals, we hold that the plain meaning of these 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 

pharmacist is 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 holding will "open a door through 

which other commercial operators ... could pass." However, if that door has 

been opened, it is the General Assembly that opened it, not the Court. 

Furthermore, to the .extent those other commercial operators are subject to 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 that phrase in quotation marks because this fee schedule 

is not what we typically think of as a fee schedule. It does not set out specific 

17 
reimbursement rates for medications and it does not adopt any specific 

p-y.blished schedule of reimbursement rates. 7 Rather it provides as follows: . 

Any duly licensed pharmacist dispensing pharmaceuticals . 

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

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. · 

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 pharmacist to 

reimbursement based on the average wholesale price the pharmacist paid for a 

given medication, plus the dispensing fee. In doing so, the CAW stated that 

the regulation neither adopted nor excluded the use of a published average 

wholesale price guide to determine the appropriate reimbursement rate. The 

Board and the Court of Appeals agreed with the CAW. 

KESA agrees with the CAW's interpretation of the 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 other hand argues that the published average 

wholesale price can be used and should be used to determine the 

reimbursement rate. We address each argument in turn below. 

7 It appears from the evidence that the published and actual average wholesale 

prices of pharmaceuticals change frequently, with the published guides being updated 

frequently. 

18 
KESA is correct that its expert testified that published average wholesale 

prices have little to do with actual wholesale prices. However, neither that 

testimony nor the regulation itself compel the finding KESA seeks. We note 

that KESA's own witness testified that IWP's prices were in keeping with the 

pharmacy fee schedule, testimony the CAW could have chosen to believe. 

Furthermore, although M. Joseph claimed that it obtained medication for KESA 

at an average of 25% less than the· average wholesale price, spreadsheets filed 

by KESA show that the M. Joseph and IWP prices for some medications were 

the same. Thus, KESA's proof was, at least in part, inconsistent with its 

argument. Finally, if the Department of Workers' Claims had wanted to 

exclude the use of published 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 

that published 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 reimbursement price. 

Therefore, IWP's argument that those guides should be the sole arbiter of 

reimbursement rates is without merit. 

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

· required to, take into consideration the published average wholesale price. The 

19 
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 AW may not simply adopt either of those pricing guides 

in toto. s The AW must determine the actual wholesale price the pharmacist 

paid, which may or may not have 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 under the regulation. 

We recognize that this could, as lWP argues, put a considerable strain on 

the already busy AWs. 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 lWP pursuant to the statute and regulations, which he correctly 

interpreted to be the actual average wholesale price IWP paid. However, the 

s 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 AW 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 particuiarly 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 AW must 

undertake the appropriate analysis before admitting or excluding any proffered pricing 

guides. 

20 
CAW did not make any specific findings regarding the actual average wholesale 

price IWP paid for _the medications it dispensed. 

KESA's argument that its payment to IWP based on the M. Joseph 

agreement satisfies the regulation is without merit. As we understand this 

argument, KESA believes that the pharmacy benefit management companies 

with which it has contractual relationships have established the average 

wholesale price through their contracts with the pharmacies. Thus, by paying 

IWP the M. Joseph price, KESA is paying the actual average wholesale price. 

However, the 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 AW with 

instructions to make findings regarding what IWP's actual average wholesale 

price was for the medications at issue. 

Finally, we note that 803 KAR 25:092 § 3(4) provides that "[a]ny 

insurance carrier, self-insured employer or group self-insured employer may 

enter into an agreement with any pharmacy to provide reimbursement at a 

lower amount than that 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 entering into a similar 

arrangement with IWP. However, KESA cannot unilaterally impose 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 may find 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. 

"It is fundamental that administrative agencies are creatures of statute 

and must find within the statute warrant for the exercise of any authority 

which they claim." Dept. for Nat. Res. and Envtl. Prot. v. Stearns Coal & Lumber 

Co., 563 S.W.2d 471, 473 (Ky. 1978). KRS 342.040 provides for the 

assessment of interest on past due income benefits; however, there is no 

corollary for payment of interest on past due medical expense benefits. We 

presume that the General Assembly acted intentionally when it provided for the 

payment of interest on past due income benefits while omitting the payment of . . 

interest from past due medical expense benefits. See Turner v. Nelson, 342 

S.W.3d 866, 873 (Ky. 2011). Therefore, we agree with the CAW, the Board, 

and the Court of Appeals that !WP is not entitled to any interest on any past 

due payments. 

D. The Board correctly reversed the CAW's assessment of costs. 

The CAW found that the Attorney General's opinion did not provide 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 that the Attorney General's opinion: (1) stated that the 

claimants did not have the right to choose their pharmacy, but it did not state 

that KESA had the right to make that choice; (2) was based in part on the 

22 
ipcorrect assertion that physicians were directing therr patients to IWP; and (3) 

ran counter to a Board opinion. Based primarily on the preceding findings, the 

CAW ordered KESA to pay the entire cost of the proceedings. The Board found 

that the Attorney General's opinion was sufficient to support KESA's actions. 

The Court of Appeals agreed with the Board. We agree with the ultimate 

decisions by the Board and the Court of Appeals but for somewhat different 

reasons. 

KRS 342.310 provides, in pertinent part, that an AW "may assess the 

whole cost of the proceedings" if he determin~s that the proceedings were 

"brought, prosecuted, or defended without reasonable ground." Whether to 

assess such cost is within the AW's discretion. Richey v. Perry Arnold, Inc., 

391 S.W.3d 705, 713 (Ky. 2012). 

If the only issue before the CAW was whether KESA could direct the 

claimants to use KESA approved pharmacies, we might be convinced that the 

Board and the Court of Appeals. overstepped their bounds. It was within the 

CAW's discretion to find that the opinion of the Attorney General was not a 

sufficient basis to support KESA's action, particularly in the face of a Board 

opinion to the contrary. However, as the litigation progressed, the 

interpretation of KAR 25:092 became an issue as did the appropriateness of 

IWP's charges·. This was an issue of first 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. 

23 
Therefore, we affirm the Court of Appeals and the Board in their reversal of the 

CAW's assessment of the cost of the proceedings against KESA. 

IV. CONCLUSION. 

For the foregoing reasons, we affirm the Court of Appeals opinion 

regarding the assessment of interest and sanctions. We also affirm the Court 

of Appeals that a pharmacy is a medical provider. However, we vacate the 

remainder of the Court of Appeals opinion and remand because the CAW did 

not make a determination regarding the actual average wholesale price paid by 

IWP. On remand, the AW, or CAW if appropriate, must determine what IWP's 

actual average wholesale price was for the contested medications. The AW, or 

CAW if appropriate, may reopen proof if he or she deems it necessary to 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. 

24 
COUNSEL FOR APPELLANTS/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 Brown Todd, LLC 

James Gordon Fogle 

Fogle Keller Purdy, PLLC 

COUNSEL FOR APPELLANT/CROSS-APPELLEE, PRESTON HIGHWAY 

METERED CONCRETE, BY AND THOUGH KESA, THE KENTUCKY WORKERS' 

COMPENSATION FUND: . 

Joseph L. Ardery 

Griffin Teny Sumner 

Frost Brown Tcidd, LLC 

James Gordon Fogle 

Fogle Keller Purdy, PLLC 

Natalie Laszkowski 

Fulton- & Devlin, LLC 

COUNSEL FOR APPELLEE/CROSS-APPELLANT, INJURED WORKERS' 

PHARMACY: 

Charles E. Jennings 

Eric M. Lamb 

Lamb & Lamb, PSC 

COUNSEL FOR APPELLEES/CROSS-APPELLANTS, KEVIN KERCH AND 

DONALD GRAMMER: 

Charles E. Jennings 

25 
COUNSEL FOR APPELLEE/CROSS-APPELLANT, KEM BARNES: 

Jeffery Roberts 

Roberts Law Office 

COUNSEL FOR APPELLEE/CROSS-APPELLEE, RITA MERRICK: 

McKinnley Morgan 

Morgan Collins & Yeast 

COUNSEL FOR APPELLEE/CROSS-APPELLEE, SHAUNA LITTLE F /K/ A 

HARDIN: 

Paul Guthrie 

COUNSEL FOR APPELLEE/CROSS-APPELLEE, JACK CONWAY, ATTORNEY 

GENERAL: 

Andy Beshear 

Attorney General of Kentucky 

James Robert Carpenter 

Assistant Attorney General 

COUNSEL FOR AMICUS CURIAE, INSURANCE INSTITUTE OF KENTUCKY: 

Kenneth J. Dietz 

Lucas & Dietz, PLLC 

COUNSEL FOR AMICUS CURIAE, KENTUCKY ASSOCIATION OF GENERAL 

CONTRACTORS: 

Gregory Lonzo Little 

Ferreri Partners PLLC 

26