Pennsylvania High Court Rules Workers' Comp Anti-Referral Law Does Not Cover Physician-Owned Pharmacies

The Pennsylvania Supreme Court on June 16, 2026 ruled 5-2 that the anti-referral prohibition in Section 306(f.1)(3)(iii) of the Pennsylvania Workers' Compensation Act does not bar physicians from directing injured workers to pharmacies in which those physicians hold a financial interest. The decision, 700 Pharmacy v. Bureau of Workers' Compensation Fee Review Hearing Office, No. 101 MAP 2024, resolved five consolidated appeals and reversed the Commonwealth Court.

The statutory provision at issue prohibits a workers' compensation provider from referring a claimant to an entity for "laboratory, physical therapy, rehabilitation, chiropractic, radiation oncology, psychometric, home infusion therapy or diagnostic imaging, goods or services" when the referring provider has a financial interest in the receiving entity. Carriers had long argued that the phrase "goods or services" at the end of that enumerated list swept in prescription drugs and professional pharmaceutical services, making any physician referral to a pharmacy in which the doctor held an ownership stake an impermissible self-referral under the Act. The Commonwealth Court had agreed with that reading.

Justice Mundy authored the majority opinion, joined by four colleagues. The majority held that the plain language and structure of the provision establish an enumerated list of eight specific service categories — laboratory, physical therapy, rehabilitation, chiropractic, radiation oncology, psychometric, home infusion therapy, and diagnostic imaging — and that "goods or services" modifies only those eight categories rather than functioning as a freestanding catchall. Because prescription drugs and professional pharmaceutical services appear nowhere in the enumerated list, the majority concluded the anti-referral provision does not reach physician-to-pharmacy referrals. The majority wrote: "We cannot ignore the statute's plain language in pursuit of its spirit," and noted that if the General Assembly wishes to bring pharmacy self-referrals within the prohibition, it is free to do so. Justices Wecht and McCaffery each dissented.

The underlying facts were direct: treating physicians Drs. Purewal and Jalali prescribed medications for injured workers under their care and directed those claimants to 700 Pharmacy, an entity in which the physicians held a financial interest. The State Workers' Insurance Fund, acting as insurer for the workers' employers, refused to pay the resulting pharmacy bills, citing the anti-referral provision. Fee-review proceedings and Commonwealth Court review went in the Fund's favor. The Supreme Court reversed, holding that the self-referral ban simply did not apply to the pharmacy relationship.