What is a Formulary and How Does a State-Adopted Formulary Work For You?

At the 2015 California Coalition on Workers’ Compensation Annual Conference (CCWC), a panel discussed the pros and cons of a state-adopted pharmacy formulary. Panelists included Dr. Bernyce Peplowski and Alex Swedlow from CCWC and Brenda Wood and Karen Caterino from Healthcare Solutions.

A workers’ compensation formulary is designed to be specific for industrial injuries and provides a list of drugs that will be reimbursed without prior authorization or adjuster approval. Drugs not included in the formulary require pre-authorization prior to being dispensed. If the formulary is set up properly, it will reduce administrative burden and costs and ensure that the injured worker receives the appropriate medications in a timely manner.

The types of workers’ compensation formularies are:

• Open – No formulary, retrospective denials.
• Client-specific formulary – No state mandate on formularies. Controlled by a PBM.
• Closed – Usually mandated by states. Examples of states with workers’ compensation closed formularies are Texas and Washington. Tennessee is in the process of implementing a closed formulary.

Points to consider when implementing a formulary:

• Formularies without regulations are not likely to provide the same outcomes. The regulations must have teeth.
• Maintaining a formulary can be a very challenging task. That is why implementing an existing formulary such as ODG is much easier than creating one from scratch.
• Must have clear guidelines and regulations on medications to ensure minimal impact to the injured worker.

Data was presented to explain why the use of a formulary is gaining traction in California. SB 1124 has been introduced, which would require the State Division of Workers’ Compensation to create a pharmacy formulary:

• The California workers’ compensation pharmacy spend is over $1.2 billion and growing.
• Prior fee schedule changes have not curbed the growth of pharmacy spending.
• 45% of all utilization review and IMR requests involve pharmacy. Almost 90% of the time the IMR decision upholds the UR denial of the pharmacy treatment.
• In particular, compound drugs account for 12% of IMR requests and the denial is upheld 98% of the time.
• Pharmacy spending now is over 13% of medical spend two-years post injury, and it is a significantly higher percentage in later years.
• There was a 25% increase in pharmacy spend from 2011 to 2012.

CCWC performed a study to determine what the impact would be if the Texas or Washington formularies were adopted. This study showed there would be a savings of 28-65% based on the rules of these formularies.

Finally, the panel talked about the evolving health care model toward a value-based system. This is something mandated by the Affordable Care Act and Medicare is leading the way. In a few years, 85% of Medicare reimbursements will be under this value-based formula.  These value-based systems focus on the outcome for the worker. The easiest measure of outcomes for injured workers is whether they are ultimately able to return to work. Formularies need to be developed based on evidence-based guidelines and the discussions need to involve many different types of physicians and pharmacists.