The most important bill Gov. Brown signed into law during the 2015 legislative session (Assembly Bill 1124) calls for implementation of a prescription-drug formulary by July 1, 2017.
For those of you unfamiliar with the concept of a formulary, a formulary is a list of drugs that are okay to prescribe without meeting special criteria, such as preauthorization. This list is usually based on evidence-based guidelines, such as the Official Disability Guidelines or American College of Occupational and Environmental Medicine Practice Guidelines.
Why is a formulary important? States like Texas, Washington, and Ohio have adopted formularies and helped payers save big bucks.
The California Workers’ Compensation Institute (CWCI) estimate a formulary could save California payers $102 million to $420 million a year in pharmacy payments. The Workers’ Compensation Research Institute (WCRI) estimate California may reduce prescription drug spending by 14% with a Texas-style formulary. (Links to both studies, which are available for purchase, are at the bottom of this article.)
AB 1124 requires the Division of Workers’ Compensation (DWC) to post the proposed formulary regulations on its website in mid-to-late 2016. Those regulations will detail the drugs okay to prescribe without preauthorization, and might also contain a “blacklist” of drugs that require a payer’s preauthorization, or are difficult to prescribe. Most expect the regulations to feature some regulatory “teeth” barring reimbursement to doctors and pharmacists who willfully ignore the new formulary after it takes effect on July 1, 2017.
The new law also calls for a committee of doctors and pharmacists familiar with drug dispensing, prescribing, and evidence-based medicine to make recommendations to the DWC on the proposed formulary. In an attempt to avoid biased committee members, lawmakers mandated that committee members not be employed by a drug company or a pharmacy benefit manager.
AB 1124 also requires pharmacists to dispense generic alternatives unless a generic is not available or the doctor specifically requests the name-brand version. This alone could save payers millions, assuming that most doctors respect the use of generics.
Formularies impact compound pharmacies by requiring preauthorization for frequently-used ingredients in compound medications, or by blacklisting certain ingredients altogether. However, compound pharmacies in formulary states did not go the way of the dinosaur. Instead, they evolved and found ways to make compound drugs with drugs that do not require preauthorization.
Industry experts foresee a formulary impacting the WCAB as follows:
- It will reduce the number of authorization disputes that frequently occur during lien conferences and lien trials.
- It will drastically reduce the number of prescription drug requests going to Utilization Review and Independent Medical Review (IMR).
- With fewer authorization disputes, the state’s busiest boards (such as Los Angeles) may see less lien cases clogging the dockets.
- There will be a sharp reduction in compound pharmaceuticals during the first year of the formulary, and then a gradual increase in compound drugs during the second and third years of the formulary. This is because it will take compound pharmacists some time to develop new recipes for compound drugs.
The one thing we can guarantee is that the formulary will be strongly criticized by some and highly praised by others. Comments on the first batch of proposed formulary regulations in mid-to-late 2016 promise to be interesting.
While there is no guarantee the DWC will respond to each comment it receives, the DWC is required to update the formulary every three months after implementation. This is notable because it allows the DWC to fix any mistakes that produce unforeseen consequences. For example, the DWC could blacklist a drug in July 2017, realize that was a poor decision because millions of patients need it, and reinstate that drug in October 2017. In the alternative, should a drug that is “okay to prescribe” suddenly result in a number of overdoses, the DWC could quickly blacklist that drug.
I analyzed potential formulary scenarios in this article I wrote for WorkCompCentral back in 2009. As you can see, there are a million different ways the DWC could make this formulary tick, and there are plenty of details to fight over: https://www.workcompcentral.com/news/story/id/0fc837f18333babf6f12ae4bacf8f22fk
So, what next? Many questions remain about how the formulary will be designed, and how workers’ compensation practitioners can use it.
Here is a list of some of the questions I have about the formulary that will help us determine how to best use the proposed formulary, and what its true impact will be. I believe that the DWC will provide answers to these questions in chronological order, as they issue press releases and propose new regulations:
- Who is on the formulary committee?
- What ideas are produced during the initial formulary committee meetings? Are they full of infighting and heavy conflict, or is everyone agreeable to a general plan of action?
- What do the proposed formulary regulations look like in mid-2016? What drugs are okay to prescribe without preauthorization, if any? Do the regulations specify what drugs need to go through UR? What drugs are blacklisted, if any? What hoops does a patient have to jump through to obtain a blacklisted drug? What do the regulations say about repackaged drugs? How does the formulary impact current compound drug recipes?
- Will the formulary be completed by the deadline of January 1, 2017?
- Will the formulary be ready for implementation by the implementation deadline of July 1, 2017? If not, when will it be ready?
To read AB 1124, click here:
To read the CWCI’s formulary study, click here:
To read the WCRI’s formulary study, click here:
John P. Kamin is a workers’ compensation defense attorney at Bradford & Barthel’s Woodland Hills location. Mr. Kamin previously worked as a journalist, where he reported on legislative developments in workers’ compensation law across all 50 states. Feel free to contact John at firstname.lastname@example.org or at (818) 654-0411.
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