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Closed formularies gaining ground as more states adopt guidelines

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The adoption of closed drug formularies for state workers comp programs is gaining momentum, although improvements on several fronts may mask unintended consequences.

Ohio, Oklahoma, Texas and Washington state have implemented closed drug formularies grounded in evidence-based medicine guidelines for their workers comp programs, with Arizona, Arkansas, California, Louisiana, Maine, Michigan, Montana, Nebraska, North Carolina and Tennessee weighing or taking similar steps.

Formularies make it more difficult for physicians to prescribe drugs such as opioid painkillers since they require proof that nonformulary drugs are medically necessary for injured workers.

Texas and Oklahoma based their formularies on the Official Disability Guidelines published by Encinitas, California-based Work Loss Data Institute. Tennessee has adopted the guidelines for the formulary it will launch next year and Arizona, Arkansas and Louisiana apparently are leaning in that direction.

The guidelines are popular among states partly because of their limited implementation and maintenance costs and the ease of adopting their N and Y drug lists, said Mark Pew, senior vice-president at PRIUM, a Duluth, Georgia-based medical management company. On the flip side, states must adopt the guidelines in full because the institute does not allow changing its content, although a state can create carveouts via legislation or rules, he said.

However, the use of “Y” drug (preferred) and “N” drug (requiring preauthorization) lists results in a “black-and-white formulary” that fails to acknowledge certain drugs may be appropriate in some situations, but not others, said Joseph Paduda, principal of Madison, Connecticut-based Health Strategy Associates L.L.C. and president of trade association CompPharma.

“The binary nature of the Y and N process is a gross simplification of what formularies should be,” he said.

Compelling outcomes in Texas also factor into the guidelines' popularity, Mr. Pew said.

The number of injured employees receiving N drugs fell 65% and costs dropped 83% for new claims for injuries suffered on or after Sept. 1, 2011, the Texas Department of Insurance said of the first implementation phase of its comp formulary. Utilization and costs also declined for legacy claims, with costs dropping from $1.42 million in August 2013 to $290,000 in September 2014.

“At first blush, the results in Texas look remarkably good,” Mr. Paduda said.

The American College of Occupational and Environmental Medicine Practice Guidelines is another option unless states feel they need to create their own formularies, Mr. Pew said. Washington state — the earliest adopter of a closed drug formulary in 2004 — did just that and was able to implement a more restrictive formulary because of the monopolistic nature of its workers comp system.

While it's not known which treatment guidelines California will adopt, the characteristics of the state's comp system could indicate a general approach, experts said.

“It's too early to say what direction California is going to go, but I think they're leaning toward a Texas model because of applicability versus a Washington model because it's monopolistic,” Mr. Pew said.

Not all stakeholders support evidence-based closed drug formularies for workers comp programs.

Robert Rassp, a Sherman Oaks, California-based attorney at Law Office of Robert G. Rassp representing workers comp claimants, said such formularies are geared to cost containment and limit physicians' ability to treat their individual patients.

“I don't think the formularies that exist promote or encourage individualized medicine,” he said. “It's not about what's best for the patient. It's how to save money.”

But patients are not automatically barred from receiving specific drugs just because they are not in the formulary, said Johnnie Hanna, pharmacy program director at the Ohio Bureau of Workers' Compensation in Cincinnati, a monopolistic state that established its own drug list in 2011.

“The idea that a formulary is a reason someone would not get a drug they needed is absolute nonsense,” he said.

The Ohio bureau has reported significant utilization and cost declines, including a 74% drop in skeletal muscle relaxants, a 25% decline in narcotics and a total drug cost drop of 16%, for a total of $20.7 million, in fiscal year 2014 compared with fiscal year 2011.

“You cannot approach it from a fiscal perspective,” Mr. Hanna said “If you do, you lose the moral high ground and you will lose support from some of your constituencies.”

For several stakeholders, the critical unanswered question is what happens to patients who lose access to opioids because of a closed drug formulary.

While the majority likely receive opioids through their group health plans or Medicare, “I think it's highly likely that some portion of claimants who are no longer receiving opioids are accessing street drugs,” Mr. Paduda said. “I have no idea what percentage, but you can't just stop taking opioids.”

And there is the possibility these injured workers are turning to heroin, although it is difficult to prove a direct correlation. A July U.S. Centers for Disease Control and Prevention report indicated 45% of people who used heroin also were addicted to opioids.