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Non-Formulary Drugs

Closed Formulary Could Decrease Use of ‘N’ Drugs

The recent success of the closed pharmacy formulary in the Texas workers’ comp system shows promise for other states, especially in regions where non-formulary drugs are prevalent.
By: | July 21, 2014 • 3 min read

The recent success of the closed pharmacy formulary in the Texas workers’ comp system has caught the attention of practitioners in other states. A new report from the Workers Compensation Research Institute concludes that, all things being equal, other states could see similar results.

Texas was the first multi-payor state to adopt a formulary that requires pre-authorization for certain medications deemed as investigational, experimental, and those with “N” drug status under the Official Disability Guidelines, including many opioids. A study by the Texas Department of Insurance last year showed the formulary resulted in a decrease of about 80 percent in payments made for non-formulary drug prescriptions.

“If other states are able to successfully implement a Texas-like formulary, there is a huge potential for decreasing the utilization of the drugs designated as non-formulary drugs by Texas,” the report says, “which may in turn lead to substantial prescription cost savings in all states, particularly New York.”

The study looked at 23 states in terms of how a closed formulary might affect the prevalence and costs of drugs. Non-formulary drugs — those requiring pre-authorization in the Texas system — were most prevalent in New York.

The Texas study found physicians reduced prescriptions for non-formulary drugs by 70 percent and infrequently substituted formulary drugs for non-formulary drugs in response to the closed formulary. In assessing the potential impact of a closed formulary in the other states, the authors considered various alternative assumptions about how physician prescribing practices might change.

In the scenario where the response of physicians in other states is similar to that of their Texas counterparts, total prescription costs could be reduced by 14-29 percent among the study states with New York on the higher end. “Other states that could realize potential prescription cost savings of 20 percent and higher are New Jersey, Virginia, Massachusetts, Pennsylvania, Connecticut, and Maryland,” the report said. “Even at the lower end, states like California and Missouri might reduce their prescription drug spending by 14 percent.”

Some states may instead see physicians substitute with formulary drugs more frequently than Texas physicians did. “States may realize sizable but lower cost savings if all non-formulary drugs are substituted with other drugs,” the report states. “We estimated that within-class substitution of all non-formulary drugs with formulary drugs may reduce prescription costs by 4 to 16 percent in other study states.”

Cost savings could be greater in states where brand name medications are common. Even if physicians substituted all non-formulary drugs with cheaper generic alternatives, there could be substantial cost savings.

The researchers noted that the formulary is only one aspect of the Texas workers’ comp system that may differ from those in other states. States that do not have a “well-defined” utilization review process might see less cost savings due to the increased litigation.

Nonetheless, the authors said non-formulary drugs were prevalent in the 23 states studied, which could result in at least some cost savings. “States with higher prevalence [of non-formulary drugs] like New York, and Louisiana, have a larger scope for reducing the use of non-formulary drugs. In these states, workers’ compensation payors have an opportunity for more active management of prescribing patterns.”

Nancy Grover is co-Chair of the National Workers’ Compensation and Disability Conference and Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at
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The Impact of Marijuana

WC Payers More Likely To Face Reimbursement Requirements for Pot

A New Mexico appeals court decision ordering an employer and insurer to reimburse an injured worker for his medical marijuana is believed to be the first such court ruling in the nation.
By: | July 21, 2014 • 4 min read
med marijuana2

Peter D. White is compiling receipts and other financial transactions to determine how much his client has spent on medical marijuana since a state workers’ comp judge OK’d reimbursement last year. Once done, the New Mexico attorney will submit the information for payment of past and ongoing use of the drug to the employer and insurer — with the backing of the New Mexico Court of Appeals.

The case has drawn a plethora of comments and reactions from workers’ comp practitioners. While the case may not generate major changes in the near future, the issue is not going away anytime soon.

“To be honest, it’s a matter of timing as much as anything,” White said of the ruling. “It’s the tide in this country.”

White noted that the U.S. House of Representatives recently voted to restrict the Drug Enforcement Administration from using funds to enforce the federal ban on the drug against state-licensed medical marijuana patients and providers.

“I think this [case] would certainly serve as a model,” he said. “I would hope that would be the trend.”

The case, Gregory Vialpando v. Ben’s Automotive Services and Redwood Fire & Casualty, involved a worker whose lower back injury in 2000 resulted in multiple surgical procedures. All parties to the case ultimately agreed he had a 99 percent permanent partial disability.

Last year, a New Mexico workers’ compensation judge found that Vialpando was qualified to participate in New Mexico’s Medical Cannabis Program authorized by the state’s Compassionate Use Act. The WCJ also ordered his employer and the insurer to reimburse the worker for the medical marijuana. The appeals court upheld the decision.

Several factors likely contributed to the ruling, White and others said. One of the factors is that another client of White’s has been getting medical marijuana for the past four years. In that case, the workers’ comp judge ordered the employer — the state of New Mexico — to reimburse the injured worker for the drug rather than pay for it outright.

“We used the order from his case and think it mattered that there had not been any issues that had arisen,” White said.

A unique aspect of the case is that there was no divergence of medical opinion as to whether the claimant would benefit from the use of medical marijuana.

The court also considered medical marijuana more of a service than a medication. “In New Mexico, workers’ comp physicians do recommend a lot of things that are not medications such as therapy and acupuncture,” White said. “The idea being that this is part of the overall picture of reasonable and necessary medicine.”

In its appeal, the employer said the WCJ’s order was illegal and unenforceable under federal law, and that the state act and regulations promulgated pursuant to it do not recognize reimbursement for medical marijuana. But the appeals court disagreed (see box).

“I kind of felt it gave a little short shrift to the issue,” said Albert B. Randall Jr., a Baltimore-based attorney with Franklin & Prokopik PC. “Rather than the court trying to find out what was the correct answer, it pointed to the attorney saying ‘if you didn’t raise the issue or supply enough information, we’re going to rule the way we are going to rule.”

Looking Into the Future

If the same scenario were presented again, Randall does not necessarily believe there would be a different outcome. “I find it hard to believe that the Court of Appeals will rule on the constitutionality of the Compassionate Use Act within the context of a workers’ compensation claim; rather, I think that would have to be a separate challenge addressed by the court.”

Other attorneys were not so sure. “The employer apparently did an inadequate job of making the argument because the appellate court could not identify any federal law that was being violated,” said Colorado attorney Ronda K. Cordova of Ritsema & Lyon PC. “This seems like an argument that could be explored further.”

Another workers’ comp attorney concurs that a more definitive defense could have been mounted. James Pocius, a shareholder with Marshall Dennehey Warner Coleman & Goggin in Philadephia, believes a criminal attorney or workers’ comp attorney with a more extensive background in other areas of the law could determine that requiring reimbursement would make the employer an accomplice by violating a federal law.

“If the federal argument is not made more clearly, you could have another state make the same decision,” Pocius said. “I think it will be incumbent on the person with the next case to argue it correctly.”

As to whether the ruling will prompt similar litigation, Randall believes it will open the flood gates. “There is no question any savvy claimant’s attorney will use this in support of his argument,” he said. “I think this is going to be a groundbreaking case and likely will be cited throughout the country in support of the use of medical marijuana in workers’ compensation claims.”

This is the first of a two-part series exploring the potential legal and practical ramifications of the order. In part two, experts weigh in on the likelihood the case may spur more requests for medical marijuana in the workers’ comp system and issues surrounding reimbursement.

Nancy Grover is co-Chair of the National Workers’ Compensation and Disability Conference and Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at
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Sponsored: Healthcare Solutions

Achieving More Fluid Case Management

Four tenured claims management professionals convene in a roundtable discussion.
By: | June 2, 2014 • 6 min read

Risk management practitioners point to a number of factors that influence the outcome of workers’ compensation claims. But readily identifiable factors shouldn’t necessarily be managed in a box.

To identify and discuss the changing issues influencing workers’ compensation claim outcomes, Risk & Insurance®, in partnership with Duluth, Ga.-based Healthcare Solutions, convened an April roundtable discussion in Philadelphia.

The discussion, moderated by Dan Reynolds, editor-in-chief of Risk & Insurance®, featured participation from four tenured claims management professionals.

This roundtable was ruled by a pragmatic tone, characterized by declarations on solutions that are finding traction on many current workers’ compensation challenges.

The advantages of face-to-face case management visits with injured workers got some of the strongest support at the roundtable.

“What you can assess from somebody’s home environment, their motivation, their attitude, their desire to get well or not get well is easy to do when you are looking at somebody and sitting in their home,” participant Barb Ritz said, a workers’ compensation manager in the office of risk services at the Temple University Health System in Philadelphia.

Telephonic case management gradually replaced face-to-face visits in many organizations, but participants said the pendulum has swung back and face-to-face visits are again more widely valued.

In person visits are beneficial not only in assessing the claimant’s condition and attitude, but also in providing an objective ear to annotate the dialogue between doctors and patients.

“Oftentimes, injured workers who go to physician appointments only retain about 20 percent of what the doctor is telling them,” said Jean Chambers, a Lakeland, Fla.-based vice president of clinical services for Bunch CareSolutions. “When you have a nurse accompanying the claimant, the nurse can help educate the injured worker following the appointment and also provide an objective update to the employer on the injured worker’s condition related to the claim.”

“The relationship that the nurse develops with the claimant is very important,” added Christine Curtis, a manager of medical services in the workers’ compensation division of New Cumberland, Pa.-based School Claims Services.

“It’s also great for fraud detection. During a visit the nurse can see symptoms that don’t necessarily match actions, and oftentimes claimants will tell nurses things they shouldn’t if they want their claim to be accepted,” Curtis said.

For these reasons and others, Curtis said that she uses onsite nursing.

Roundtable participant Susan LaBar, a Yardley, Pa.-based risk manager for transportation company Coach USA, said when she first started her job there, she insisted that nurses be placed on all lost-time cases. But that didn’t happen until she convinced management that it would work.

“We did it and the indemnity dollars went down and it more than paid for the nurses,” she said. “That became our model. You have to prove that it works and that takes time, but it does come out at the end of the day,” she said.


The ultimate outcome

Reducing costs is reason enough for implementing nurse case management, but many say safe return-to-work is the ultimate measure of a good outcome. An aging, heavier worker population plagued by diabetes, hypertension, and orthopedic problems and, in many cases, painkiller abuse is changing the very definition of safe return-to-work.

Roundtable members were unanimous in their belief that offering even the most undemanding forms of modified duty is preferable to having workers at home for extended periods of time.

“Return-to-work is the only way to control the workers’ comp cost. It’s the only way,” said Coach USA’s Susan LaBar.

Unhealthy households, family cultures in which workers’ compensation fraud can be a way of life and physical and mental atrophy are just some of the pitfalls that modified duty and return-to-work in general can help stave off.

“I take employees back in any capacity. So long as they can stand or sit or do something,” Ritz said. “The longer you’re sitting at home, the longer you’re disconnected. The next thing you know you’re isolated and angry with your employer.”

“Return-to-work is the only way to control the workers’ comp cost. It’s the only way,” said Coach USA’s Susan LaBar.

Whose story is it?

Managing return-to-work and nurse supervision of workers’ compensation cases also play important roles in controlling communication around the case. Return-to-work and modified duty can more quickly break that negative communication chain, roundtable participants said.

There was some disagreement among participants in the area of fraud. Some felt that workers’ compensation fraud is not as prevalent as commonly believed.

On the other hand, Coach USA’s Susan LaBar said that many cases start out with a legitimate injury but become fraudulent through extension.

“I’m talking about a process where claimants drag out the claim, treatment continues and they never come back to work,” she said.


Social media, as in all aspects of insurance fraud, is also playing an important role. Roundtable participants said Facebook is the first place they visit when they get a claim. Unbridled posts of personal information have become a rich library for case managers looking for indications of fraud.

“What you can assess from somebody’s home environment, their motivation, their attitude, their desire to get well or not get well is easy to do when you are looking at somebody and sitting in their home,” said participant Barb Ritz.

As daunting as co-morbidities have become, roundtable participants said that data has become a useful tool. Information about tobacco use, weight, diabetes and other complicating factors is now being used by physicians and managed care vendors to educate patients and better manage treatment.

“Education is important after an injury occurs,” said Rich Leonardo, chief sales officer for Healthcare Solutions, who also sat in on the roundtable. “The nurse is not always delivering news the patient wants to hear, so providing education on how the process is going to work is helpful.”

“We’re trying to get people to ‘Know your number’, such as to know what your blood pressure and glucose levels are,” said SCS’s Christine Curtis. “If you have somebody who’s diabetic, hypertensive and overweight, that nurse can talk directly to the injured worker and say, ‘Look, I know this is a sensitive issue, but we want you to get better and we’ll work with you because improving your overall health is important to helping you recover.”

The costs of co-morbidities are pushing case managers to be more frank in patient dialogue. Information about smoking cessation programs and weight loss approaches is now more freely offered.

Managing constant change

Anyone responsible for workers’ compensation knows that medical costs have been rising for years. But medical cost is not the only factor in the case management equation that is in motion.

The pendulum swing between technology and the human touch in treating injured workers is ever in flux. Even within a single program, the decision on when it is best to apply nurse case management varies.

“It used to be that every claim went to a nurse and now the industry is more selective,” said Bunch CareSolutions’ Jean Chambers. “However, you have to be careful because sometimes it’s the ones that seem to be a simple injury that can end up being a million dollar claim.”

“Predictive analytics can be used to help organizations flag claims for case management, but the human element will never be replaced,” Leonardo concluded.

This article was produced by Healthcare Solutions and not the Risk & Insurance® editorial team.

Healthcare Solutions serves as a health services company delivering integrated solutions to the property and casualty markets, specializing in workers’ compensation and auto liability/PIP.
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