Closed Formularies Hold Promise for Workers’ Compensation Pharmacy Management

October 12, 2015

Opioids linked to escalation in claim cost
Opioids linked to escalation in claim cost

With the signing of A.B. 1124 by Governor Jerry Brown October, California has now joined a handful of states that have adopted closed pharmaceutical formularies in their workers’ compensation systems. While many details have yet to be worked out, the decision comes as good news for injured workers and payers alike.

Closed formularies essentially use evidence-based medicine to identity the prescription drugs that should be allowed for certain injuries. All other medications must go through a preauthorization process. The idea is to ensure the injured worker gets the right medication at the right time for the right reasons – AND to reduce unnecessary pharmacy costs.

Implemented appropriately, a formulary can result in better outcomes and lower costs. In fact, a study last year suggested California’s workers’ compensation system could save between $124 million and $420 million annually by adopting a formulary similar to that in effect elsewhere.

In addition to the states that have already implemented closed formularies or are in the process of doing so, several others are considering the idea. The result could be better efficiencies and significant savings for Tower MSA Partners’ clients in managing workers’ compensation claims even before the Medicare Set Aside review and triage process.

The specifics

Under A.B. 1124, the administrative director of California’s Division of Workers’ Compensation must create a formulary by July 1, 2017 for medications prescribed to injured workers. Between now and then, California regulators must determine a program that best addresses the needs of California’s injured workers.

Four states – Ohio, Oklahoma, Texas and Washington have implemented closed drug formularies. Arizona, Arkansas, California, Louisiana, Maine, Michigan, Montana, Nebraska, North Carolina and Tennessee are among the other states considering the formularies or in the midst of developing them.

There are several different types of formularies in effect. Washington, which adopted the first such formulary in 2004, has a more restrictive program than those in some other states. Texas, on the other hand includes more therapeutic groups and more choices within each group.

Regardless of the type of formulary, the states have touted successes. Texas, Washington and Ohio have all reported lower costs.

Texas, which implemented its closed formulary for new injuries in September 2011 and for all injuries in September 2013, also reported the number of injured employees receiving ‘N’ drugs – those requiring preauthorization – fell 65% and costs dropped 83% for new claims for injuries suffered on or after Sept. 1, 2011. Also important, the formulary has led to a significant reduction in the number of injured workers taking opioids on a long-term basis.

The Ohio Bureau of Workers’ Compensation likewise reported significant utilization and cost declines, including a 74% drop in skeletal muscle relaxants, a 25% decline in narcotics and a total drug cost drop of 16%, for a total of $20.7 million, in fiscal year 2014 compared with fiscal year 2011.

Many decisions must be made before California’s formulary takes effect and a variety of issues must be addressed. For example, the pre-approval process for drugs not allowed, decisions about the strategy for long-time opioid users, and considerations of compound medications must be determined.

Fortunately, a team of workers’ compensation stakeholders involved in helping to craft the legislation ensured some important provisions were included. The law requires the California Division of Workers’ Compensation to update the formulary at least quarterly, establish an independent pharmacy and therapeutics committee, accept public comment and publish two interim status reports

Supporters are confident when all is said and done, California’s formulary will provide effective treatment for injured workers, reduce delays and medical disputes, and reduce costs.

How closed formularies impact claims and MSAs

Closed formularies can serve as a gatekeeper in preventing troublesome medications being prescribed to injured workers. Medical providers in states with closed formularies tend to change their behavior and prescribe more clinically appropriate medications and treatments rather than unnecessary opioids and other drugs that require preauthorization.

While providers need approval to be reimbursed for medications not automatically allowed, supporters say closed formularies do not seek to prevent injured workers from having access to medications that are truly beneficial to them.

Workers’ compensation payers can also look for less adversarial relationships with providers, since there will be fewer questionable medications prescribed for the injured worker. Drugs that are not appropriate for first line therapy are generally those that are not allowed without prior authorization, under the closed formularies.

Many steps must be taken before California’s closed drug formulary will take effect and the devil is surely in the details. However, the fact that the nation’s largest workers’ compensation market is going in this direction is good news indeed!

Tower MSA Partners’ Kristine Wilson Will Participate on the MSP/MSA Compliance Panel at California Workers’ Compensation & Risk Conference

October 1, 2015

Kristine M. Wilson

Wilson will discuss CMS changes to conditional payments and other compliance issues

DELRAY BEACH, Fla.–(BUSINESS WIRE)–Kristine Wilson, COO and senior legal counsel for Tower MSA Partners, will speak at the California Workers’ Compensation & Risk Conference. Tower MSA Partners provides Medicare Set-Aside compliance services nationally and specializes in reducing medical and pharmacy costs on claims prior to settlement.

Wilson will participate on the “MSP/MSA Compliance Open Mic” panel. Topics include whether or not to submit an MSA to the Centers for Medicare and Medicaid Services, the re-review process, and SMART Act changes that affect claims occurring after October 5, 2015. Moderated by Safety National’s Mark Walls, the panel also features Jake Reason with EK Health, Russell Whittle of Examworks, and Tony Comas with Burns White.

“The SMART Act allows for an appeal process for conditional payment disputes,” said Wilson.

The conditional payment process is also changing. “The big news is that Medicare will seek reimbursement for conditional payments prior to settlement,” Wilson said.

Medicare’s new contractor, Commercial Repayment Center, will issue conditional payment notifications when an entity indicates its ongoing responsibility for medical. “Payers only have 30 days to dispute notifications before a conditional payment demand goes out,” Wilson said. “To mitigate their exposure, payers should ensure their Mandatory Insurer Reporting data is complete and immediately respond to conditional payment notices.”

The California Workers Compensation and Risk Conference will be held September 30 through October 2 at the St. Regis Hotel in Dana Point, Calif., and more information is available at http://www.cwcriskconference.org.

About Tower MSA Partners

Headquartered in Delray Beach, Fla., Tower MSA Partners’ services include pre-MSA Triage, MSAs, physician peer reviews, CMS submissions, MSA administration, medical cost projections, life care plans, conditional payments, and Section 111 reporting. With more than 50 years combined experience in pharmacy, legal oversight and medical care, Tower proactively stages claims, working collaboratively with clients to identify issues and intervene to modify outcomes. Tower remains involved in the claims, through final resolution, MSA and/or other settlement. This model enables Tower’s clients to provide better care to injured workers, reduce claim and MSA costs, and obtain CMS acceptance of the MSA. For more information, visit www.TowerMSA.com and www.MSPComplianceBlog.com.

Contacts
For Tower MSA Partners
Helen Knight, (813)690-4787
helen@kingknight.com

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