California to Roll Out Formulary July 1st, 2017: The Good and the Bad of Drug Formularies


By Devon Mahaney, PharmD Manager of Pharmacy Services for ExamWorks Clinical Solutions

At the most recent Department of Workers’ Compensation (DWC) Educational Conference held on February 23rd, George Parisotto, Acting Administrative Director Division of Workers’ Compensation, updated attendees on the status of the development of the California formulary. The formulary is set to go live on July 1st, 2017, and will be based on medical treatment standards set by the American College of Occupational and Environmental Medicine (ACOEM) in an effort to remain consistent with the Medical Treatment Utilization Schedule (MTUS) guidelines.

In October 2015, Gov. Jerry Brown signed a bill to establish a closed formulary for medications prescribed in the California workers’ compensation system. A.B. 1124 requires the administrative director of California's Division of Workers' Compensation to create a formulary on or before July 1st, 2017 for medications prescribed to injured workers. A rulemaking is expected for March 10th to establish an evidence-based drug formulary and update all MTUS evidence-based treatment guidelines.

How does a drug formulary work?

Workers’ compensation formularies have been adopted in Texas, Arkansas, Delaware, Nevada, Ohio, Oklahoma, Tennessee, Wyoming, and Washington. Texas adopted a closed formulary in 2005, while Washington State established a “preferred drug list” that involves step therapy, a process where patients must try one or more similar lower cost medications before the more expensive drug would be covered.

Medications that are “non-preferred” would require prior authorization, a process that involves the patient and/or the provider demonstrating that the prescribed drug is medically necessary.

The California workers’ compensation formulary will designate medications by a “preferred” or “non-preferred” status. Only self-administered, outpatient drugs (versus physician administered, such as injections) are included on the preferred drug list. According to George Parisotto, the establishment of the formulary preferred drug criteria has been drafted by DWC and includes the following:

  • Medication is noted as a first-line therapy,
  • Medication is recommended for most acute and or acute/chronic conditions addressed in clinical guidelines,
  • Medication has a safer adverse effects (risk) profile in comparison to other therapies, and/or
  • Medication is for the treatment of common work-related injuries and illnesses.

What are the potential outcomes after establishing a Workers’ Compensation formulary?

An October 2014 study by the California Workers' Compensation Institute (CWCI) found that adopting a mandatory formulary, similar to that of Texas or Washington State, could potentially reduce California's workers’ compensation medication costs by $124 million to $420 million a year.

In 2005, Texas enacted legislation that mandated a medication formulary be applied to workers’ compensation drug claims. The formulary resulted in an 80% drop in prescribing of non-preferred drugs.

If the Texas formulary were applied to California’s workers’ compensation medication claims, 17% of the prescriptions would not have been allowed. If the Washington formulary, containing a more exclusive set of preferred medications, had been applied, 39% of prescriptions would not have been allowed.

The CWCI indicated 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."

According to the American College of Occupational and Environmental Medicine (ACOEM), workers’ compensation formularies may lead to lower total drug costs, decreased opioid use, reduced use of compounds, and lower utilization review (UR) costs. On the flip side, drug formularies may lead to less desirable outcomes such as decreased patient compliance, increased burden for providers, medical decisions that are not patient‐focused, and increased UR or other administrative costs.

What are the main objectives in establishing a Workers’ Compensation formulary?

The American College of Occupational and Environmental Medicine (ACOEM) recommends that establishing a drug formulary should be:

EVIDENCE-BASED: The formulary should be based on well‐documented evidence‐based methodology including ACOEM practice guidelines, and the Drug Effectiveness Review Project (DERP). Formulary regulations should be consistent with existing UR processes and treatment guidelines.

CONDITION-SPECIFIC: The formulary should be condition-based.

MONITORED: A Pharmacy and Therapeutics Committee to oversee the formulary’s content. Monitoring of the formulary’s value should be ongoing. Over time, states should examine their carrier‐reported.

NON-DISRUPTIVE TO PATIENT CARE: Formulary regulations should seek to minimize delays in filling prescriptions. Provision must be made for initial implementation, particularly for “legacy claims” where patients may already have been receiving medication therapy chronically.

EASY TO USE: Institute a process by which providers can request authorization for non‐formulary medications based on medical necessity.

Who will be impacted?

The formulary will impact Payers, Pharmacy Benefit Managers, Utilization Review, Bill Review, pharmacies, and anyone that prescribes or receives medication under workers' compensation.

What are the next steps?

Further implementation details are forthcoming, but one item stands out as a priority: education of providers and payers. The State of California Department of Industrial Relations offers mandatory physician education as it relates to the MTUS. Providers will need additional education on how to utilize and prescribe under the new drug formulary. Institution of formularies will often require a transition period for providers to alter drug regimens in compliance with the approved formulary list, but this transition process is not yet clear.

In Texas, for example, a grace period was established based on legacy status that allowed providers to gradually transfer medications from non-preferred agents to preferred agents. Speakers at the DWC Educational Conference assured stakeholders that decisions would be made with the best interest of patient treatment in mind, but they did not offer much information with regard to how this process of transition would be established. Pending consideration for the short timeline, the requirement for education, and the consideration for uninterrupted patient care, the California formulary could be a big win for those looking to address prescription woes in the world of workers’ compensation.

About the Author

Devon Mahaney, PharmD, MSCC serves as the manager for ExamWorks Clinical Solutions (ECS) Pharmacy Services. In this capacity, she provides leadership in determining strategies for drug optimization and clinical negotiation. She has nine years of experience in numerous areas of pharmacy practice including emergency medicine, pain management, neurology, post-operative rehabilitation, pediatrics, neonatal intensive care, and neonatal abstinence syndrome maintenance. Prior to joining ECS, she provided clinical support and education as a pharmacist in a hospital setting, held a preceptor position through the University of Montana Skaggs School of Pharmacy, served on the Drug Safety Committee at Benefits Hospital in Montana, and participated with the Pharmacy and Therapeutics Committee at the University of New Mexico Hospital. Dr. Mahaney received her Doctorate from the State University of New York at Buffalo.