By Brian Allen, VP of Government Affairs, Mitchell
The flurry of state legislation in the first half of 2018 has shed light on how ubiquitous workers’ compensation issues are becoming. Opioid-related overdoses and deaths have hit some states particularly hard; West Virginia’s death rate from prescription opioids is 37.7 per 100,000 citizens (based on 2016 data). In response, West Virginia passed comprehensive opioid prescribing control legislation. Hawaii, North Carolina and Oklahoma are just three of the many other states who have drafted or passed legislation or rules in the past month relating to opioid prescribing limits.
This legislation is just the beginning for addressing major workers’ compensation concerns. Some states have taken additional steps to develop comprehensive drug formulary programs, focusing on improving overall care in the workers’ compensation system.
Statewide Drug Formularies
Drug formularies are not a new concept. Pharmacy Benefit Managers have been employing them for many years and have seen success in decreasing pharmaceutical related risk and improving outcomes. However, state-mandated formularies specific to workers’ compensation have only recently emerged as an important tool in improving the workers’ compensation system.
The question, then, is why now? Why is the movement at the state level to develop formularies so important?
First, the advent of state-mandated formularies provides clarity on which medications have proven efficacy for workers’ injuries, drives increased scrutiny about dangerous drug combinations and supports more stringent drug MED calculation monitoring.
Additionally, states have taken a pro-active approach to fighting the opioid epidemic on all fronts, from lawsuits to formularies. With the pressure of the opioid epidemic and new data to support that workers’ compensation initiatives including formularies have found success, it is easy to see why more and more states are looking to their own legislative or regulatory processes to support safe recovery.
Formularies Help Solve Issues – A Look at the Data
Formularies in many ways have been able to curb the abuse of physician dispensing and the practice’s associated costs. A 2016 study by NCCI (PDF) showed that in states where physician dispensing was not highly regulated, the allocation of costs of prescription drugs to physician dispensing in the year 2014 exceeded 20%. In contrast, those states that had strict regulations on physician dispensing saw only 2% of total costs attributed to physician dispensing.
Additionally, the cost of drugs can be as much as 500%, or more, in a physician-dispensed setting rather than in a pharmacy. For instance, a study by WCRI found that, “injured workers in Florida, Georgia, Illinois and Maryland paid physicians on average $4-to-$7 for a pill of ranitidine (Zantac), when they could have bought it at Walgreens for 33 to 42 cents, depending on the strength and quantity.”
Physician dispensing can also create a problem for the injured worker. The patient could be receiving medications from multiple sources or may be taking medication that would interact with the newly prescribed medication. The controls typically put in place to prevent this dangerous pattern of prescribing, like those used by PBMs, are undermined when the patient receives medication from several different physician-dispensing locations. A physician may have no way of knowing this and, even with best intentions, could provide the patient with a harmful prescription. Additionally, the insurer would likely not know about these medications until at least a month later when the bill is received. By then, the overall cost and risk of the claim may be considerably higher.
Many states have made reforms to their workers’ compensation systems since discovering the problems with physician dispensing. Some states have completely banned the practice of physician dispensing while others have limited what physicians are allowed to dispense. A study by WCRI showed that post-reform states saw a decrease in physician dispensing. South Carolina, for instance, saw a 63% decrease.
The study also showed that, while these reforms initially showed cost savings, some physicians have found ways around these limitations. Some are continuing to dispense drugs repackaged at different strengths that are not included in restrictions, which are expensive and have made overall cost savings plateau.
Formularies combat this issue by continuing to put limits on what physicians are allowed to dispense and how much they can be reimbursed for the prescriptions.
This continues to be an issue that future formulary creation and reforms can hopefully address.
Compounding medication is typically cited as a way to adapt medication to the needs of a specific patient by combining two or more drugs (often in the form of a topical cream). Outside of the workers’ compensation system, a prescription compound is a rare event and happens only when there is clear medical justification for the use of a compound.
Inappropriate compounded medications inflate costs for workers’ compensation systems. The two or more separate drugs are typically inexpensive and when combined can be remarketed at a much higher price. Some compounds can cost hundreds to thousands of dollars, while their ingredients cost is minimal when purchased separately. Additionally, costs of these drugs continue to rise. For instance, Texas saw the average price of compounding scripts more than double between 2010 and 2014, from $356 to $829.
Compounding also presents an issue in the form of patient safety. These compounded drugs are not approved by the Food and Drug Administration (FDA). There is no testing or approval process after they are compounded. This means that, though the active ingredients may have evidence to show their safety and efficacy, the compounded versions have little or no such data. FDA research has shown that compounded medications may only show benefit in cases where patients are unable to swallow pills or are allergic to part of the commercially available drug.
Formularies limit the use of compounded medications in workers’ compensation claims. Texas (PDF), for instance, passed an amendment in 2018 to its formulary to place all compounded medications on the prior-authorization list. Prior to the 2018 change, the state saw a 46.4% increase in compound drug prescriptions and an average cost increase from $356 to $829 between 2010 and 2014. Compounding pharmacies who were taking advantage of the loophole learned that by creating a compound with all “Y” or approved ingredients they could avoid the prior authorization requirement. In closing this loophole, Texas is hoping to see these numbers drop significantly.
New York and Arkansas are following similar paths with their new formularies, which will require prescribers to prove medical necessity of the compounded medications before injured workers receive the medication.
In the next part of this article, we will look closer at how state-mandated formularies are addressing opioid abuse and the success that Texas and Ohio have seen with their formularies.
About Brian Allen
Brian Allen is a nationally recognized policy expert for workers’ compensation and insurance issues across the country. Allen currently serves as Vice President of Government Affairs for Mitchell’s Pharmacy Solutions team. Allen has lobbied nationally for workers’ compensation issues for more than 14 years and has more than 25 years of political experience. Allen is a former elected member of the Utah House of Representatives. As a government affairs specialist, Allen was actively engaged in the development of the Texas Drug Formulary Rule, the Tennessee Drug Formulary Rule, the California and Arkansas formularies and other critical rulemakings around the country.
Allen is currently involved in Indiana, New York, Pennsylvania, Montana, Louisiana and Arkansas on drug formulary proposals and is working with other states on medical management, pharmacy and reimbursement issues.”
About Mitchell ScriptAdvisor
Mitchell ScriptAdvisor, the PBM solution built for the workers’ compensation industry, leverages technology and expertise to connect the ENTIRE claim. From a fully customizable portal experience to industry leading networks and comprehensive clinical management, ScriptAdvisor provides effective, efficient, and successful management of your claims. ScriptAdvisor delivers visibility beyond an individual prescription. It integrates with bill review and managed care solutions for a more holistic approach to claim management. ScriptAdvisor combines all of this with robust analytics and outstanding customer service to empower better outcomes for all. Read more of Mitchell’s thought leadership at mitchell.com/mpower