Monday, June 30, 2014

I am Learning More, Does that Mean I Understand More?

In "The Heart of the Matter," former Eagle Don Henley gives us that line, "the more I know, the less I understand." It describes so much in life. As I study the efforts at cost controls in workers' compensation, and try to diligently follow the news across the country, this line came to mind. I think I am knowing more, but question if I am understanding less (does it just lead to more questions?)

Texas has adopted a closed formulary, an effort to restrict the methodology by which prescription medication is provided to injured workers. In the formulary model, there are medications that are presumptively acceptable for treatment of injured workers; they are listed in the formulary. Other non-listed medications can be prescribed, but are subject to a different degree of scrutiny and must be pre-authorized.

I described this in a post Zohydro and Closed Formularies last December. The ability of Texas to react to the concerns about Zohydro or other medications is an advantage of the closed formulary, but is only part of the story. Implementation of the formulary decreased opiod scripts in Texas about 10%.

The Workers' Compensation Research Institute (WCRI) released a June 2014 report Impact of a Texas-Like Formulary in Other States. What is the result of the closed formulary from a financial perspective? The Texas experience is described in the report, and supports that prescribing habits have changed in Texas since the formulary was implemented. The legislation that allows the formulary was passed in 2005. After years of development, it was adopted in December 2010, not a quick process. 

On September 1, 2011 the formulary became effective for new claims occurring after that date. The claims that were already existing at that time were labelled "legacy claims" and were unaffected by the formulary for the time being. In 2013 the restriction became effective on all claims in Texas, regardless of accident date.  The two-year implementation phase-in from 2011 to 2013 for legacy claims was designed to allow time for physicians to make adjustments in their patients' treatment, adopting formulary substitutes, or to adjust to the process required for prescribing non-formulary medication.

According to WCRI's study, the impacts on costs in Texas were notable. The prescriptions of medication not on the formulary list decreased 67% in 2011. The cost of "non-formulary drugs" decreased over 80%. The report notes that prescription costs overall also decreased in Texas following the formulary implementation. For the drugs listed in the formulary, the decrease was nominal, about 4%.  

An interesting process conclusion came from the study. The expectation was that a physician electing not to prescribe a non-formulary medication would instead substitute a formulary script in its place. The WCRI study concludes that this did not occur, however. Instead, faced with a desire to prescribe a non-formulary substance, the physicians tended to simply "not write the prescription." It is fair to say that both the volume and the cost of prescriptions changed following the adoption of the formulary. 

Texas is different. There is no avoiding that conclusion. It is a state that has been reforming and constricting its workers' compensation programs for years. There are significant portions of the Florida workers' compensation act that were influenced or inspired by the Texas statute. That is nothing new in workers' compensation. Since the first constitutionally acceptable acts were adopted, states have tended to plagiarize each other to some extent. As with the Oklahoma opt out, questions will be asked about whether and how innovations in Texas might work elsewhere.

So, what is the potential for savings by other states if they follow the Texas lead and adopt the "closed formulary" model? This is the real focus of the WCRI study. The study analyzed claims in 24 jurisdictions, including Florida. The Florida analysis included almost 13,000 claims, 9,677 of which included at least one prescription, and a total volume of 77,428 scripts. The study included most of the large workers' compensation states such as California, Florida, New Jersey and New York.

The research concluded that in Florida about 14% of all scripts were for medication that are not on the Texas formulary. If the same formulary were adopted in Florida, physicians would either seek preauthorization and continue prescribing these, elect to instead prescribe a formulary substitute for these, or elect to forego the prescription entirely. 

In this multi-state analysis where the percentage of non-formulary scripts ranged from just under 10% to almost 16%, Florida at 14% was near the top. Only South Carolina, New Jersey, Arkansas, Virginia, Louisiana and New York had higher percentages. WCRI reports that the non-formulary prescriptions are dropping in Florida. The 14% reported for 2012 is down from about 18% a year earlier. 

The cost prediction was more notable. According to the study, that 14% of Florida prescriptions accounted for about 24% of the Florida workers' compensation prescription costs. As with the volume, the cost percentage (24%) in 2012 was also a decrease from 2011, when it was about 30%. New York's non-formulary prescriptions accounted for over 35%. Clearly the cost impact of the "non-formulary" scripts can vary significantly between jurisdictions. 

Notice that the data supports that use of the medications not listed on the Texas formulary is already dropping in Florida despite the lack of a formulary here. Might factors other than the formulary be likewise contributing to the data in Texas?

The study notes that other factors can impact the cost of medications and therefore the analysis of the formulary concept. Two notable discussions include the impact of name brand versus generic medications and the impact of physician dispensing. Each would therefore bear consideration in the overall analysis of whether a closed formulary would be efficacious for Florida. 

Returning to Don Henley, the chorus of the song says "I've been trying to get down to the heart of the matter, but my will gets weak, and my thoughts start to scatter . . .." A friend of mine used to constantly remind me that we may focus too much on the "what is so" and not enough on the "so what." All of these analyses are interesting, they measure what is currently occurring in delivery of prescription medication, but "so what?" 

The real issue is whether other states like Florida will look to something like a closed formulary to further reduce costs. As a generality, states seem to have a recurrent and sometimes a constant interest in reduction of costs and rates. 

According to WCRI, if Florida adopted the Texas formulary, the prescriptions for non-formulary medications in Florida would decrease from the 14% reported in 2012. They estimate that this would decrease to something between about 4% and 10%. Whether the current trend of decrease, without the formulary, will continue is not addressed.

WCRI estimates that prescription cost savings from the adoption of the Texas formulary would range from 14% to 29% for the states studied. The report predicts that New Jersey, Virginia, Massachusetts, Pennsylvania, Connecticut and Maryland could each see savings in excess of 20%. The study concludes that Florida's savings would be about 18% to 19%. That is significant.

Of course, there are cautions and qualifiers. The researchers acknowledge that physicians in any other state may or may not react to the formulary restriction similarly to Texas physicians. Remember that the reaction in many instances in Texas was to just not write a prescription rather than substituting a formulary substance for a non-formulary substance. Essentially WCRI is saying that if history repeated itself the savings could be thus, but are not saying that history will necessarily repeat itself if the formulary is adopted in other states. 

Is it time to decide if you are a fan of the formulary idea? Perhaps. My point, however, is not that the time for decision has come. My point is that history teaches us that ideas for cost savings and rate reduction tend to attract legislative attention. The idea of a closed formulary will be debated in states other than Texas. Whether Florida gives the idea consideration is yet to be seen. I do think it is time to begin to understand the formulary concept so that a valid public conversation can be had here if it is proposed here. 

Is there a negative impact on patient care based on constriction of medication choices? Is there a cost on health care providers in completing paperwork to use non-formulary medications? Is there an impact on patient recovery, either in time or extent, from the use of formulary as opposed to non? What would the reduction in prescription costs actually translate to in terms of premium cost savings to employers? Are there efficiencies, savings, burdens, costs inefficiencies associated? 

All interesting lines of analysis. If the idea becomes a subject for debate in Florida, which will be the "heart of the matter?" I hope the more we come to know on this the more we understand.

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