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California firms could save $124M-$420M a year with closed comp drug formulary

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California firms could save $124M-$420M a year with closed comp drug formulary

California's workers compensation system could see pharmaceutical costs cut by $124 million to $420 million a year if the state adopted a closed prescription drug formulary like ones used in Texas and Washington state, according to the California Workers' Compensation Institute.

Closed formularies allow a limited list of covered medications to be approved for workers comp claims. In a report released Monday, Oakland, California-based CWCI said that using such a system could cut California's workers comp drug spend between 12% and 42%.

“Potential savings may in fact be greater, as the analysis did not account for any reductions in the absolute volume of prescriptions, nor did it estimate savings from reduced levels of affiliated services such as drug testing or reduced medical dispute resolution expenses for utilization review and independent medical review,” the report reads.

In one example, CWCI showed that Opana, an opioid that costs $600 per prescription, would be prohibited from comp claims under a closed formulary. Comp claimants who are deemed to need a strong painkiller would instead receive drugs such as tramadol, codeine or levorphanol, which cost between $60 to $180 per prescription.

A report in June by the Cambridge, Massachusetts-based Workers Compensation Research Institute found that adopting a closed drug formulary could result in a 14% to 29% decrease in total prescription costs for other states that adopted a Texas-like closed formulary.

CWCI President Alex Swedlow and WCRI Policy Analyst Vennela Thumula will discuss the use of closed formularies to manage comp costs on Wednesday during Business Insurance's 2014 Workers Comp & Safety Virtual Conference. They will be joined by Dr. Steven Feinberg, chief medical officer of Palo Alto, California-based Feinberg Medical Group, who will discuss the appropriate use of opioids in workers comp.

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