Monday, October 13, 2014

Formularies in the News

The California Workers' Compensation Institute (CWCI) released their study of controlling pharmaceuticals on October 6, 2014. They acknowledge that Washington and Texas have each implemented drug formularies, and have enjoyed cost savings as a result. The complete report is here. Their data helps with the question of whether a formulary might be part of the solution elsewhere, California in particular. 

Formulary restrictions are not new. Texas enacted legislation in 2005 that led to the deployment of its formulary. The results have been remarkable. Prescription volume has dropped and the cost of "non-formulary drugs" decreased by 80% according to the Workers' Compensation Research Institute. I summarized some of the WCRI findings in a June 2014 post

Another interesting point on closed formularies is the control they afford regarding specific medications or potentially types of medication. The Texas experience with Zohydro, and its recent approval by the FDA is discussed in a December 2013 post. Essentially, while others have wondered about the effect of "heroin in a pill," Texas simply did not add it to their formulary, and that is that. For a doctor to prescribe it in a Texas Comp case is not impossible, but it will require paperwork and pre-approval. So it is less likely. 

The CWCI report is a results from an examination of "2.6 million California workers' compensation prescriptions" filled in an 18 month period ending June 30, 2013. That is a huge amount of data. Statistical sampling is not uncommon, and this would appear to be a significant sample size. The CWCI team applied the Texas and Washington formularies to these 2.6 million prescriptions. They concluded that either formulary would have saved the California marketplace significant money.

Formularies esentially provide a pre-approved list of medication. Physicians can prescribe these in any case, subject to their own judgement. If a physician prefers instead to prescribe something that is not "on the list," then preapproval is required. Texas has found that this process leads to less scripts and to less expensive alternative medications being used. 

According to the CWCI, if the Texas formulary had been applied to the studied 18 months of scripts, then 17% of the prescriptions would not have been allowed. In terms of payments for prescriptions, the Texas formulary would have exlcuded 29% of the payments. 

If the Washington forumlary had been applied, the result would have been more dramatic. The CWCI characterizes Washington's restriction as a "more exclusive formulary," which would have excluded "39% of the prescriptions and 70% of the payments." 

The CWCI concludes that "using the Texas and Washington formularies in California would reduce brand-name drug payments between 42 and 95 percent, and reduce the use of controversial Schedule II opioid painkillers by 36 to 45 percent, reducing the associated payments for these drugs by 65 to 78 percent."

The cost savings? CWCI estimates "a potential savings of $124 million to $420 million a year."

It begins to beg the question. Why not? Is there a downside to medication formularies in workers' compensation? This is not my expertise certainly. However, when a marketplace is presented with an opportunity that has a potential savings approaching one half billion dollars per year, would it make sense to ask the question, why not? Perhaps there is a compelling counter-argument? Does it impact patient recoveries either in terms of the length of recovery or the patient's comfort through recovery? Does a formulary inhibit or influence physician participation in the treatment market?

One of the great benefits of periodically gathering with others who study workers' compensation is that these questions are discussed. I would appreciate hearing from opponents of formulary plans, to help me better understand what counter arguments exist. Should Florida consider the implications of such a process on this marketplace? If a formulary was considered, what are the comparative advantages or disadvantages of the Washington and Texas approaches, beyond the dollars involved?

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