Opioid Management

Closed Formularies a Useful Tool

Several states have implemented closed formularies in their workers’ comp systems, and are reporting positive results in their efforts to address opioid abuse.
By: | August 10, 2015

“Many workers who have taken opioid painkillers following on-the-job injuries have become addicted, suffered additional injuries or fatally overdosed,” according to the National Safety Council. “As a result, courts have ordered employers and workers’ compensation insurance carriers to pay for detoxification, medication-assisted treatment and death benefits to surviving family members.”

The situation has escalated to the point where the NSC is calling on employers to create policies around the use of opioids. Workers’ comp stakeholders are looking to additional strategies to address the misuse of opioids, including closed pharmacy formularies.

“A formulary is an approved medication list often based on clinical review of evidence-based medicine and both nationally and regionally approved medical guidelines,” according to a recent drug trend report from pharmacy benefit manager Helios. PBMs have used formularies for a number of years. Now states have begun to adopt them for their workers’ comp systems.

“Basically there are two types [of closed formularies],” said Brian Allen, vice president of government affairs for Helios. “There is the Texas style, which is more inclusive, where there is a list of drugs not included, and all other medications are included. Washington and Ohio have a type that is a preferred medication list, and providers prescribe off of that list. It’s a narrower list. Both [types] work well.”

“It is to workers’ comp what a hammer is to construction. It will be used daily and will have an impact.” — Brian Allen, vice president, government affairs, Helios

Several states have implemented closed formularies in their workers’ comp systems, and others are considering their use. In addition to Texas, Oklahoma, Washington, and Ohio, the idea is also being considered in Arkansas, California, North Carolina, and Tennessee. Maine, Michigan, and South Carolina are said to be interested. Louisiana’s Legislature failed to pass a formulary proposal, but state regulators have indicated they will begin developing a rule. Early results are looking positive from the states that have implemented the formularies.

“We’ve seen a lot of numbers in our drug trends report,” said Nichole Wilson, director of pharmacy product development for Coventry First Script. “In general, the implementation (of closed formularies) will typically lead to a reduction in narcotics opioids utilization; a reduction in ‘N’ list drugs; compounds typically decrease, depending on the rules. They basically target some of those high-dollar, riskier drugs.”

‘N’ drugs are those included on a list of medications that will not be approved without prior authorization. They are typically taken from the Official Disability Guidelines — Treatment in Workers’ Comp Appendix A. Drugs that are not on the ‘N’ list and have been approved by the Food and Drug Administration are generally allowed for injured workers with some exceptions.

The use of formularies varies among the states using them. But experts say a formulary can lead to better outcomes for injured workers and lower costs for payers.

“Is it a panacea? No. Is it a nice tool to have on the tool belt? Yes,” Allen said. “It is to workers’ comp what a hammer is to construction. It will be used daily and will have an impact.”

Nuances of Formularies

Texas adopted a closed formulary in 2011. A 2014 report from the Texas Division of Workers’ Compensation said the cost to the system for ‘N’ drugs had fallen by 82 percent; the total number of prescriptions for ‘N’ drugs was reduced by 74 percent; and there were 66 percent fewer injured workers receiving ‘N’ drugs.

But concerns in the Texas formulary have come to light in the intervening years, and industry stakeholders are advising other states to take note. The biggest centers on compound medications, which are being easily approved.

“Typically, there would be a mix of several drugs to create a topical formula,” explained Donald Lipsy, manager of regulatory, communications, and compliance at First Script. “If they include one or more on the ‘N’ list, they require prior authorization. If not, those are allowed to go through.”

Oklahoma, which implemented its closed formulary last year, required all compounds to be treated like ‘N’ list drugs. Other states may take the same approach.

Future Trends

Formularies are most successful when multiple parties to the workers’ comp system are involved in their creation, the experts say. California, for example, is taking that approach.

“They are creating a mandate for a formulary and mandate of a committee of medical people, including pharmacists, to help set up the formulary and the variances,” Lipsy said.

Both Lipsy and Allen agree that when formularies are developed with the help of PBMs, physicians, and nurses working together, there is a better chance of getting the right drug to the right person at the right time. One of the values of formularies is the empowerment it gives the parties involved with workers’ comp claims, especially physicians.

“Since the incorporation of the Affordable Care Act some of a [physician’s] reimbursement is tired to patient satisfaction and that is starting to impact workers’ compensation as well. With that, if you have to say no to a patient it would be bad,” Allen said. “Physicians have said, ‘I’ve had people ask for medications and I don’t want to say no, but now I can say it’s not me [saying no] it’s the state.’ If the state says so, it kind of takes the physician off the hook.”

The experts believe formularies (when used with other tools to reduce overutilization and costs of prescriptions) can add great value. They say many jurisdictions are taking a closer look.

“What’s interesting is when Texas implemented and published the results [of its formulary] a lot of places paid attention,” Wilson said. “I have a feeling more and more states will be considering them because of decreases in prices and utilization. I have a feeling we will see that trend.”

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected].

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