Drug Formularies -- much Needed in Workers' Comp

Friday, October 10, 2014 | 0

Controlling drug usage in workers’ comp is – far too often – the proverbial pushing on the rope.

Sure, pharmacy benefit managers and payers have done a remarkable job constraining costs and reducing the initial inappropriate use of opioids. Virtually all payers use pharmacy benefit managers and benefit greatly from PBMs’ clinical management and pricing that is almost always significantly lower than the state fee schedule or retail price.

However…the explosive growth of compounding, the fact that a quarter of drug costs are for opioids and a third for physician-dispensed drugs, the inability of clinical staff to get many prescribing physicians to discuss potential alternative treatments, and the frustration experienced by adjusters and employers unable to resolve claims due to long-term, highly-dangerous, and counterproductive use of drugs all argue for more regulatory help.

There are two valuable and too-little used tools in the box; evidence-based guidelines backed up by strong utilization review and formularies. While many jurisdictions dabble in guidelines, the litigious nature of comp coupled with the imprecise and nebulous wording of regulations often results in more problems, less clarity, and more delays.

In contrast, formularies established in regulation, whether the very tight version used in Washington state or the loose one in Texas, are clear, precise, and incontrovertible. Drugs are either allowed or not.

The California Workers' Compensation Institute's just-released study analyzes the potential impact on work comp of those two formularies.  By comparing the drugs dispensed in the Golden State to what would have been allowed by Texas or Washington, CWCI President Alex Swedlow et. al have determined that employers and taxpayers are overpaying somewhere between $102 million and $541 million annually – with no negative effects.

Before some naysayer starts screaming about the unfairness of payers influencing doctors’ treatment decisions, that naysayer should understand that formularies are in place in every group health, Medicare, Medicaid, and individual health plan.  Moreover, said naysayer should READ the CWCI study, and note that a “formulary” may be “set” to require dispensing of the drug that is the lowest-cost but otherwise identical drug instead of a higher-priced-but-otherwise-identical medication – or use any one of several other “levels” to establish a somewhat more restrictive formulary.

Formularies provide better care and tighter control without compromising.  And, a major benefit would be the huge reduction in the contentious and generally pointless UR dealing with drugs…a third of California’s independent medical reviews are for drugs.

Joseph Paduda is owner of Health Strategy Associates in Connecticut and co-owner of CompPharma, a consortium of pharmacy benefit managers. This column was reprinted with his permission from his Managed Care Matters blog.