Formularies Rise in Popularity
Texas, Oklahoma, Washington, and Ohio have them. California and Tennessee are creating them. And a slew of other states are looking to drug formularies as a way to address pharmaceutical issues in the workers’ comp system.
Since adopting its formulary more than four years ago, Texas has seen significant reductions in the percentage of injured workers receiving inappropriate medications, along with dramatic cost reductions for new claims. Likewise, Ohio regulators report decreases of 74 percent for skeletal muscle relaxants, 25 percent for narcotics, and a reduction in total drug spend of 16 percent since its formulary took effect. Despite the impressive results, experts say formularies are not necessarily a panacea, and care is needed to ensure they are effective and avoid unintended consequences.
“Some pretty significant states in terms of size and geography are looking at this and saying, ‘this may be something we want to do,’ as another tool in helping to control utilization and costs in workers’ comp,” said Kevin Tribout, executive director of government affairs for pharmacy benefit manager Helios. “It creates a speed bump. It creates some regulatory teeth for a physician.”
“A formulary is a list of medications that are approved and deemed appropriate for treatment,” explained Joseph Paduda, principal of Health Strategy Associates and president of CompPharma, an association of PBMs. “There’s some methodology used to develop that list and put drugs on that list or exclude drugs from it. … That’s the most basic process.”
Many jurisdictions have open drug formularies for workers’ comp, for example, that allow any medication to be approved as long as the physician writes the prescription. Closed formularies, on the other hand, are lists of specific medications that require prior approval for reimbursement.
“In a closed formulary such as the one used today in Texas and Oklahoma, it’s a binary, yes/no decision,” Paduda said. “Regardless of the diagnosis, disease state, or patient need, a physician can order [the drug], the pharmacy can dispense it, but the payer can refuse to pay for it saying ‘it’s not appropriate for that particular workers’ comp injury or illness.’ But a payer cannot stop the pharmacy from dispensing it.”
Formularies are — or should be, according to the experts — developed in an open, transparent process using robust, scientifically valid evidence. Developed and implemented effectively, formularies can be a game changer for the workers’ comp system.
“If you are policymaker thinking about it, ask yourself: Is your goal to save money or improve outcomes? The answer is going to determine how you approach the formulary.” — Phil Walls, chief clinical officer, myMatrixx
“In the vast majority of states, whatever medication is prescribed is filled,” said Dr. Robert L. Goldberg, chief medical officer for PBM Healthesystems. “There’s absolutely no control over the selection of the medication, let alone brand name vs. generic, let alone what is medically necessary, let alone the cost.”
Formularies, Goldberg said, can define what is appropriate for a particular condition or diagnosis, or phase of treatment. “So you create boundaries and narrow the choices based on what is reasonable and what is necessary. As you start to narrow that down, by definition you have a great opportunity to get the right drug to the patient and also control cost — partly from avoiding overutilization or the dispensing of medications that are much more expensive but don’t provide any significant benefits.”
The overprescribing of some medications, notably opioids, is expected to decrease when a drug formulary is in effect. Evidence out of the states with formularies show that to be true.
There is also research indicating that treating physicians change their prescribing patterns because of drug formularies and are more inclined to prescribe medications they know will be approved.
“If I were a physician, I would know what medications are on the list that require prior authorization,” Tribout said. “So, if I write a script, I know more than likely it will come back requiring prior authorization and I would have to justify why; or I can simply write a prescription that doesn’t require prior authorization, my patient can get the prescription filled, and there are not three or four phone calls to be made. So injured workers are still getting care, being treated and returning to work, and physicians are changing their prescribing patterns — not reducing care, just changing their prescribing patterns to potentially provide more efficacious treatment.”
Formularies also empower physicians by giving them a reason to deny unnecessary medications to a patient without fear of losing the patient’s trust.
Both the Official Disability Guidelines created by the Work Loss Data Institute and the American College of Occupational and Environmental Medicine have formularies that can serve as a basis for the design of a formulary. A proposed formulary in Tennessee, for example, is a hybrid of the ODG and the state Department of Health Chronic Pain Guidelines.
The widely used ODG Appendix A includes a list of approved and unapproved medications. Those on the “Y” list are deemed acceptable and reimbursable while “N” medications require pre-authorization.
Texas, which uses the ODG formulary, has a more inclusive list of drugs not requiring pre-authorization, and all other medications are included. Formularies in Washington and Ohio consist of preferred medication lists, and providers prescribe off that list.
ODG recently moved some opioids on its formulary — morphine extended release, Embeda and Fentanyl patches — from the “Y” list to the “N” list. Texas is slated to make that change next month.
“This decision by the ODG means that two of the most commonly prescribed long-acting opioids for chronic pain will now require prior authorization. That means that tramadol ER will be the only long-acting opioid that can be prescribed without requiring prior approval or, in other words, has ‘Y’ status,” said Paul Peak, director of clinical pharmacy at third-party administrator Sedgwick. “It’s a big change. … It seems that the Work Loss Data Institute is updating their formulary to show what the clinical data supports, which is that long-acting opioids should not be seen as the first line options for chronic, non-malignant pain. We’re making adjustments on our end so injured workers in Texas are aware and what that means for them.”
The ACOEM-based formulary launched in late 2015. Proponents say is more robust than other formularies in that it addresses a person’s disease state.
“It’s an injury-based formulary and so far, it’s based on each of the chapters of the ACOEM Occupational Medicine Practice Guidelines,” said Goldberg, who was the primary developer of the ACOEM formulary. “For example, we took low back pain. That chapter has multiple conditions. For each condition we looked at each class of medication and broke it down into each medication within a class. So you have a stair stepping that narrows the selection.”
Goldberg said the formulary also addresses acute vs. chronic phases of treatment. Each condition is searchable by both the ICD-9 and ICD-10 diagnostic codes and includes cost information for each medication.
“The whole idea was to primarily guide physicians but also payers, other medical and health care professionals, and ultimately regulators in terms of what are the best choices and what are the evidence-based recommendations for a treatment and a condition and do it by class and by individual medication,” Goldberg said. “So it’s a very deep and broad formulary with great specificity and has a very strong evidence base.”
What makes one formulary better than another depends on a variety of factors, especially the policies within a particular state. However, the evidence used as a basis is key since this is the reason for the formulary.
“If you are policymaker thinking about it, ask yourself: Is your goal to save money or improve outcomes? The answer is going to determine how you approach the formulary,” said Phil Walls, chief clinical officer for PBM myMatrixx. “When I look at ODG there is a significant focus on cost containment. There is nothing wrong with that. We should save money. But if your focus is not just on getting rid of expensive drugs, it changes the whole dynamic — to a clinical rather than financial approach. Oftentimes, they go hand in hand but not always.”
All Eyes on California
Many eyes are on California as it develops a drug formulary. Legislation requires a plan to be in place by the summer of 2017.
“It’s a really crucial state in the workers’ comp world,” Peak said. “I believe California’s decision to move forward with a formulary because of its large impact in workers’ comp will be a big impetus for other states to consider.”
The formulary created in California must be in sync with state rules and policies in order to be effective. Despite the success of Texas’ formulary, that is not necessarily the best model for other states.
“The ODG formulary works in Texas because of Texas’ statutes,” Walls said. “The regulations they have around utilization review and retrospective denial makes the formulary work … but ODG is not a one size fits all.”
In fact, adopting the Texas-style formulary verbatim could end up costing extra in other states. As Walls explained, Texas’ formulary allows for a variety of medications that address conditions not typically associated with occupational injuries and illnesses. Once the medication has been prescribed and paid for, payers can retrospectively review the claim and deny payment.
“Most states don’t allow that. So when someone wants to adopt ODG, they really want to adopt a portion of ODG,” Walls said. “If you look at the top drug categories in comp — opioids, NSAIDs, anti-convulsants, etc., — yes, follow ODG. But don’t add anti-hypertension medications or you’ll pay for group health claims. I call it ‘ODG with common sense.’”
UR needs to go hand-in-hand with a formulary for it to be successful. As one expert said, a formulary without UR lacks enforcement capability; whereas UR without a formulary lacks something to enforce.
“A formulary is analogous to a speed limit,” Paduda said. “You can put speed limit signs up and you can hope people will obey, but that’s not a strategy. What you really need, along with a formulary, is a UR program that is tied to ensuring that medically necessary, safe drugs are approved quickly, drugs deemed not medically necessary are not approved, and there is a quick and appropriate and medically sound decision-making process when a drug is initially not approved and the treating physician appeals it.”
States considering formularies need to carefully evaluate their own policies to see what they want to include and how it should be implemented. Otherwise, they risk unintended consequences.
“Kudos to Texas for jumping in quickly; however, it has had a dramatic impact on the volume of opioids paid for in the workers’ comp system,” Paduda said. “But what happened to those patients on opioids? That’s the great unknown. … You can’t just pass a formulary and say ‘we’re in good shape here.’”
Making It Work
Creating a formulary is just the first step. Also imperative is getting medical professionals to adhere to it.
“If physicians don’t want to comply, they say ‘I don’t have to do it; they are just guidelines,” Walls said. “In workers’ comp, more than in group health, it needs to go beyond the list of drugs; it needs to support what guidelines say.”
Educating physicians on the formulary is imperative. “That is huge,” Walls said. “There is not nearly enough of that.”
A formulary that is well-founded on scientific evidence and can be accepted and understood by prescribing physicians will be more effective, experts say. “The whole idea of any set of treatment guidelines or formulary is it should cover 80 percent to 90 percent of cases so everybody knows what’s in play,” Goldberg said.
Deadline Nears for NWCDC Speaker Proposals
Don’t miss the approaching deadline for submitting proposals to speak at the 25th annual National Workers’ Compensation and Disability Conference® & Expo.
NWCDC is attended by workers’ comp and disability management decision makers, including employers and a broad range of service providers.
Last year’s speakers and the ideas they presented at NWCDC in Las Vegas remained hot topics and received mentions in workers’ comp and disability management industry media and social media for many months following the conference.
The only way to qualify is to begin by meeting the deadline for submitting a session proposal idea. The deadline is Friday, February 26, with applications available on the conference website.
After being held in Las Vegas for many years, the conference will shift venues for 2016, taking place Nov. 30 through Dec. 2 at the New Orleans Ernest N. Morial Convention Center.
Potential topic proposals that NWCDC’s speaker selection committee is eager to evaluate include:
- Injured employee advocacy strategies
- Urine drug testing and its coordination with pharmacy benefit management strategies
- The application of value-based care, including accountable care organization use.
- Medical guidelines, and how best to apply them.
- Occupational and non-occupational return-to work-strategies meeting ADA compliance.
- Pharmacy formularies and claims management opportunities.
- Psych claims and managing psych issues embedded within claims.
Those are just a few of the topic areas we are interested in hearing about from employers, vendors, attorneys, medical providers, regulators and other workers’ comp professionals. We are eager to hear other great topic ideas.
Overall, the conference looks for panels and individual speakers to present strategies that will help worker’s comp and disability claims payers solve claims challenges, teach best practices for selecting and managing service providers, or can enlighten on industry trends.
Presentation proposals can focus on new, innovative strategies that reduce injuries and costs. But risk managers, workers’ comp managers, and disability managers are also welcome, for example, to share their unique experiences with adopting tried-and-true practices at their companies.
Disability management strategies for workers’ comp and non-occupational drivers of employee absence are of interest to us.
If you or your company plans to submit a proposal for a session presentation, please keep in mind that we do prioritize those submissions that include an employer on the panel.
However, we also understand that not all presentations can include an employer speaker and we value the knowledge and information that other workers’ comp professionals serving the payer community bring to the conference.
Here is some advice to increase the potential for having your RFP selected:
- Consider submitting multiple RFPs because we sometimes receive several proposals from different companies wishing to speak on the same topic. We may only select one presentation per topic in such cases. Submitting multiple RFPs provides an alternative when one of your ideas is a popular one among several submitters.
- Select topics with relevance for a broad range of workers’ comp professionals. The greater the relevance and the stronger the speaker’s experience and knowledge, the greater the possibility of being selected.
- Avoid submitting proposals that are mere product or service pitches featuring company personnel responsible for sales or marketing.
For further discussion on potential presentation content, feel free to contact Conference Chairman Roberto Ceniceros at (208) 286-1425 or email@example.com.
The Doctor as Partner
Professionals helping employees return to work after being on disability or a leave of absence face many challenges. After all, there is a personal story behind each case and each case is unique.
In the end, the best outcome is an employee who returns to the job healthy and feeling well taken care of, while at the same time managing the associated claim costs.
Learn what most employers want from their group disability and life benefits program.
While many carriers and claims managers work toward these goals, in the end they often tend to focus on minimizing costs by aggressively managing claims to get the worker back on the job, or they “fast track” claims, approving everything and paying little attention to case management.
Aggressively managed claims can leave many employees and their doctors feeling defensive and ill-at-ease, creating an adversarial relationship that ultimately hinders return to work and results in higher direct and indirect employee benefit costs for the employer. Fast track or non-managed claims can lead to increased durations, costs and workforce productivity issues for employers.
Is it possible to provide a positive employee benefit experience while at the same time effectively managing disability and lowering an employer’s overall benefit costs?
A Unique Approach
Liberty Mutual Insurance’s approach to managing disability and absence management focuses on building consensus among all stakeholders – the disabled employee, treating physician, employer and insurer. And a key component of this process is a large team of consulting physician specialists, leading practitioners from a variety of specialties, highly regarded experts affiliated with leading medical universities across the country.
“About 16 years ago, our national medical director, Dr. Ed Crouch, proposed that if we worked with a core group of external consulting medical specialists – rather than sending most claims for Independent Medical Evaluations – we could do a better job making disabled employees and their attending physicians comfortable, and therefore true partners in producing better disability management outcomes and employee benefit experiences,” said Tim Kastrinelis, senior vice president, Distribution Partnerships at Liberty Mutual Benefits.
“In this way, our consulting physician and the attending physician are able to work with the disability case manager, the employee and the employer to deliver a coordinated, collaborative approach that facilitates a productive lifestyle and return to work.”
The result of Dr. Crouch’s initiative has produced positive results for the clients of Liberty Mutual Insurance. This consensus building approach to managing disability with consulting physician expertise has helped achieve industry leading client retention results over the past decade. In fact, 96 percent of Liberty Mutual’s group disability and group life clients renew their programs.
“By getting all stakeholders on the same page and investing heavily in consulting physician specialists, we have been able to lower claim costs and shortened claim duration for our group disability policyholders. …In the end, it’s a win-win for all.”
–Tim Kastrinelis, Senior Vice President, Distribution Partnerships, Liberty Mutual Benefits
A Collaborative Approach
In the case of complex disability medical health situations, Liberty Mutual’s disability case managers play a vital role in seeking additional expertise—an area where the industry’s standard has been to outsource the claimant for independent medical examinations.
However, Liberty Mutual empowers its disability case managers with the ultimate responsibility for the outcome of each claim. The claimant and the case manager stay together throughout the life of the claim. This relationship is the foundation for a collaborative approach that delivers a better employee benefit experience and enables the claimant to return to work sooner; which more effectively controls total disability claim and absence costs.
Sending a disabled employee with complex medical needs to an external specialist may sound like a cost-effective path, but it often comes at the cost of sacrificing the relationship and trust built between the employee and case manager. The disabled employee must explain their medical history to a new clinician, which he or she is often reluctant to do. The attending physician may be uncooperative as this move can appear to question his or her treatment plan for the employee.
As a result, the entire claims process takes on an adversarial atmosphere, building major roadblocks to the ultimate goal of helping the claimant return to a productive lifestyle.
Liberty Mutual takes a different approach. Nearly 100 physicians representing more than 30 medical specialties are available to consult with its medical and claims professionals, working side-by-side with case managers.
More than 95 percent of these consulting physicians are in active practice, and therefore up-to-date on the latest clinical best practices, treatment guidelines, therapies, medications, and programs. Most of these physicians are affiliated with leading medical universities across the country. “We recruit specialists from around the country, getting the best from such prestigious institutions as Harvard, Yale, and Duke,” said Kastrinelis.
These highly-credentialed physicians help case managers focus on providing the support needed for the disabled employee to successfully return to work as quickly as appropriate. Their collaborative work with the attending physicians provides the behind-the-scenes foundation that leads to a positive claimant experience, results in a better outcome for the claimant, and more effectively reduces total claim costs.
Coordinated Care Plan
When one of these consulting physicians reaches out to an attending physician, there’s an immediate degree of respect and high regard for his or her opinion. This helps pave the way to working together in the best interest of the employee, improving treatment plans and return to work results.
In this process, the claimant is not sent to yet another doctor; instead, the consulting specialist works with the attending physician to help fill in the gaps of knowledge or provide information that only a specialist would have. Although not an opportunity to direct care, these peer-to-peer discussions can help optimize care with the goal of helping the employee return to work.
The attending physician may have no knowledge of the challenges the employee faces in order to return to work. A return to work plan created in concert with the specialist, disability case manager, employer, and attending physician can set expectations and provide the framework for a proactive and effective return to a productive lifestyle.
“Our consulting physicians bring sophisticated medical expertise to the discussion, and help build consensus around a return-to-work plan, helping us more effectively impact a claim’s outcome and costs, and at the same time provide a better claimant experience,” said Kastrinelis.
“We can work more collaboratively with the attending physician, manage expectations, and shepherd the employee through the process much more effectively and in a much more high-touch, caring, and compassionate manner. Overall, we’re able to produce better outcomes as a result of this consensus building approach.”
“Our approach – including the use of consulting medical experts – helped us significantly reduce disability costs over two years for one large health service company,” notes Kastrinelis. “We cut average short-term disability claim durations by 4.2 days in that time, while increasing employee satisfaction with our unique disability management model and collaborative, partnership approach.
How did Liberty Mutual’s unique approach lower claim costs, reduce disability duration and improve the benefit experience for one customer?
“By getting all stakeholders on the same page and investing heavily in consulting physician specialists, we have been able to lower claim costs and shortened claim duration for our group disability policyholders,” said Kastrinelis.
“Plus, we, the employee, and the employer also get the bonus of creating a better employee benefit experience. This model has shaped our disability and absence management program to more aptly reflect our core mission of helping people live safer, more secure lives. In the end, it’s a win-win for all.”
How does Liberty Mutual provide a superior employee benefit experience?
Tim Kastrinelis can be reached at firstname.lastname@example.org. More information on Liberty Mutual’s group disability and absence management offerings can be seen at https://www.libertymutualgroup.com/business-insurance/business-insurance-coverages/employee-benefits.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.