Thursday, May 7, 2015

Drug Formularies Back in the News

On March 2, the Claims Journal opened with an enthusiastic headline: "More States Considering Workers' Compensation Drug Formularies." The potential benefits from formularies are described in Formularies in the News last fall. The idea in a nutshell is to reduce friction in the system by having a pre-approved list of medications for treatment of workers' compensation claims. 

The California Workers' Compensation Institute (CWCI) study last year concluded that these formularies are potentially a viable way to control pharmacy costs. There are occasions in my experience that lead some to conclude they have found "the" solution to a perceived problem. Experience teaches us that there are rarely "silver bullet" solutions, that is solutions that are complete, focused, and effective. 

That does not keep various constituencies from discussing a variety of "reforms" which ultimately are not adopted. Just because the "perfect solution" is elusive does not tend to keep people from searching for it. It is like that old adage from Ralph Emerson, "build a better mousetrap and the world will beat a path to your door." There are constant efforts to improve our workers' compensation systems, with varying degrees of success. 

When the Insurance Journal leads with "More States Considering Workers' Compensation Drug Formularies," one may wonder if that is the world beating a path to some innovator's door. The article explains the motivation, stating that "pharmacy costs have been a large contributor to the increase in overall workers' compensation medical costs." As a result, there have been some consumers (those that pay bills for medical care) who have sought methods to control pharmacy costs. 

One solution has been pharmacy benefit management (PBM). There are several companies who specialize in reducing pharmacy costs. Their theory is in some part an economy of scale model. By offering their consolidated purchasing power, they can obtain lower unit prices for prescription commodities; some savings they pass to their customer (the purchasers) and some savings equates into the profit of these PBMs. This is a model that health insurance companies have engaged for some time. 

The Claims Journal notes that this PBM process has been used by workers' compensation managers, but "only Washington, Texas, Ohio, and Oklahoma have" enacted state mandated workers' compensation drug formularies. Three of these are among the largest, ranked by the volume of benefits paid, workers' compensation markets in the nation, Washington (7), Ohio (8), and Texas (10). The largest systems are California (1), New York (2) and the federal systems (3). See, How Huge is it Anyway, Lex and Verum, P.11, June 2014. 

California has studied the formulary process, resulting in the CWCI conclusions published last fall, Formularies in the News. However, New York and California do not have forumlaries in place. Florida ranks 6th on the list of the nations largest workers' compensation systems, and it likewise does not have a state formulary.

According to the Claims Journal, "California, Montana, Tennessee and Maine, are currently considering drug formularies." The article notes that Louisiana is researching the subject and "Arkansas' drug formulary is set to launch in July 2015." 

WorkCompCentral more recently reported that support for a California formulary is growing. An advocate for injured workers cited in that story contends that any formulary should include "all medications and drug therapies that are available for a covered medical condition." It is unclear how that  would be different from not having a formulary. Such a broad availability seems more like the PBM model than the forumlary model.


Cost-efficiency is certainly a driver in the published studies on formularies, and was a focus of the CWCI study last fall. Some claim that there are other factors that support formularies. Jennifer Kaburick works for Express Scrips, one of the larger PBMs. She says that drug formularies produce a "likelihood of better utilization." she describes the process as "changing prescribing behavior." She cited a 90% decrease in prescriptions for some medications following implementation of these programs. 

The article quotes an official from Prium, a company involved in pharmacy management, that "prescribing behavior" of physicians could be altered through retraining, "from inappropriate care to appropriate care," and thus "patient outcomes should be better." 

The article leads to some questions. First, if formularies are all they claim why are they not under consideration in all of the systems? Could Florida's workers' compensation system benefit from a regulatory formulary? Is it even being explored?

Second, if these benefits are real, that is lower costs, better prescribing and better patient outcomes, what is the other side of the story? I have seen a fair amount written about the concept of formularies and PBMs. The WorkCompCentral story supports the conclusion that there are critics, but is there data to support that a formulary would not deliver the promised benefits, or that there are coincident detriments that persuade against the idea? If they are really the "better mousetrap" that proponents say, why are all of the states not moving in that direction? 



I am left wondering if there is some "Paul Harvey," that is "the rest of the story." Can someone tell me what it is?

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