The FBI and an insurance group that handles criminal fraud investigations are questioning industry officials about pricing practices in a growing slice of the prescription drug trade in Hawaii’s workers’ compensation and auto insurance markets, according to people familiar with the probe.

The investigation is proceeding even as legislative attempts to address the pricing controversy appear to have fizzled.

The controversy focuses on so-called drug repackagers, or companies that assist physicians who dispense medications directly to patients, rather than through the traditional pharmacy network. The repackagers also pay the physicians for the billing rights to collect payments for the drugs.

But the amounts charged to the injured workers’ insurers or employers frequently are many times greater than what a pharmacy would charge for the identical drug.

The repackagers’ invoices have sparked allegations of price gouging and resulted in hundreds of disputes filed with the state Department of Labor and Industrial Relations over the past year.

Repackagers have denied any wrongdoing.

Agents with the FBI and the National Insurance Crime Bureau, which investigates fraud on behalf of its member companies, have met with insurers and others in recent months, according to several people familiar with the inquiry who did not want to be identified because of the sensitivity of the case.

"Right now, I’m just gathering information," confirmed Jon Dela Vega, a special agent with the insurance bureau.

He said he was getting data from member companies about the pricing practices of repackagers. Dela Vega referred questions about the FBI’s role to that agency.

FBI spokesman Tom Simon, citing standard policy, said he could neither confirm nor deny the existence of an investigation.

One person familiar with the investigation said the insurance bureau initially was gathering data about prescription patterns involving physicians who were dispensing controlled substances, such as Oxycodone, directly to patients.

But more recently, the focus has broadened to include overall pricing practices, and the FBI has entered the picture, according those knowledgeable about the investigation.

One case that received investigators’ attention involved an injured public employee who had incurred $353 in prescription drug bills over four years, according to Kris Kadzielawa, director of operations for Solera Integrated Medical Solutions, a company that assists clients in reviewing workers’ compensation and auto injury claims. The injured worker also had about $11,000 in treatment costs for office visits, massage therapy, physical therapy and epidural injections during that period, Kadzielawa said.

When the worker switched to a physician who dispensed medications, the prescription drug tab — ultimately borne by taxpayers — swelled over the next 18 months to $115,165, he added. The treatment tab during that period totaled about $3,800.

Kadzielawa said physicians who deal with Prescription Partners, the company involved with the vast majority of disputes pending at the labor agency, generally are paid 70 percent of the billable amounts — a huge financial incentive to switch to self-dispensing.

Doctors and others who support physician dispensing say it provides greater convenience to injured workers, helping them stick to their treatment regimens, which helps the employees return to work more quickly. That ultimately saves employers money, proponents of the practice say.

Kadzielawa was among the insurers, employers and others who supported legislation this session to establish a price cap to rein in excessive charges on repackaged drugs. With only a few weeks left in the legislative session, those bills appear to have stalled.

Measures to streamline the dispute resolution process at the labor agency also have died — even as the number of disputes has soared.

Bill Kunstman, a Labor Department spokesman, said 2,204 cases pertaining to prescription drug costs are pending before his agency.

As recently as five years ago, medication price disputes were rare. But as more drug repackagers entered Hawaii’s market, the situation changed dramatically.

"The filing of so many billing disputes during the last year — over 2,200 — is of unprecedented magnitude and presents a challenge to the department’s ability to play the role as set forth in the billing dispute process," Kunstman said in an email to the Star-Advertiser.

The department sent letters to 33 insurance carriers and employers asking them to try to negotiate settlements, Kunstman said.

If the two sides fail to reach agreement, the department can intervene.

With so much in dispute, some legislators are reluctant to change Hawaii law.

"I believe the parties involved in this issue can work out their differences to come up with an acceptable solution, thus legislation at this time is premature," Rep. Sylvia Luke said in a statement to the Star-Advertiser.

Luke is chairwoman of the House Finance Committee, which did not advance bills to establish a price cap or streamline the dispute resolution process.

Although Hawaii already regulates drug prices in workers’ compensation and auto insurance cases, a loophole basically allows repackagers to set virtually any wholesale amount, resulting in markups ranging from 100 percent to more than 1,000 percent, employers and insurers say.

One of the key elements of the criminal investigation will turn on the wholesale price repackagers use to calculate the amounts they charge, industry officials say.

Because the law isn’t clear on how the wholesale price is established, they said, it may be difficult to prove fraud.

Repackaged drugs still represent a small but unknown slice of the overall medication market in workers’ compensation and auto insurance cases. But that slice is growing at a healthy rate — and has the potential to cost taxpayers big bucks, industry officials say.

The city, for instance, was billed nearly $700,000 last year for repackaged drugs, up from about $53,000 in 2005, the first year repackagers entered the Hawaii market, according to city data. The city is disputing virtually all of those charges.

Kadzielawa, whose clients include the city, said a few months ago only about 30 physicians locally were dispensing drugs directly to patients.

Today, that group has grown to about 50, he said.