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!

Managing Chronic Pain in Older Adults

April 8, 2014

According to the ACPA (American Chronic Pain Association) Resource Guide to Chronic Pain Management, “persistent or chronic pain is prevalent in older adults.”

“Nearly one third of all prescribed medications are for patients over the age of 65 years.   More than thirty percent of hospital admissions among the elderly may be linked to an adverse drug related event or toxic effect from opioids and sedatives.  Unfortunately, many adverse drug effects in older adults are overlooked as age-related changes (general weakness, dizziness, and upset stomach) when in fact the patient is experiencing a medication-related problem.  In addition, some older individuals may be more sensitive to medications, more likely to experience side effects, and more likely to be using multiple drugs with the associated risk of interactions between the drugs.”

Workers’ Comp Implications

For those who manage workers’ compensation claims, these statistics should highlight the importance of a consistently executed decision making paradigm when authorizing prescription medications for older patients. 

  • Before approving a new pain medication for an elderly injured worker, confirm that the initial dose is being prescribed at the lowest possible strength and frequency. 

  • When increases are requested, approve only those changes to strength and frequency that are adjusted slowly to optimize pain relief. 

  • When possible, confirm that the patient is monitoring and managing his / her own side effects.

When dealing with less dangerous treatment options for injuries in the elderly population, potential treatment options include:

  • Use of multiple drugs together – Careful  use of multiple drugs is potentially advantageous as the combination of smaller doses of more than one medication may minimize the dose-limiting adverse effects of using a particular single drug.

  • Alternatives to pharmacologic treatment – As an alternative to prescription drugs, physical rehabilitation and other interventional therapies, including targeted injections and acupuncture, can be helpful to minimize side-effects and maximize physical function with pain relief

Triggers For Potential Concern

Pain management in the elderly is a unique challenge.  Beyond the normal concerns of addiction and overuse, those who authorize treatment in a workers’ compensation claim for an older worker must also compare the potential dangers associated with the side effects of the medication against its promised value.  Triggers that may warrant intervention for an older injured worker include:

  • Opioid treatment that continues for more than 90 days post injury / surgery

  • An increase in the strength or frequency of an opioid prescribed more than 90 days post injury / surgery

  • A request to change from an orthopedic or other specialist to a pain management specialist more than 90 days post injury/surgery

  • A decrease in opioid drug use followed by a request for a new treating physician

  • The appearance of a long acting opioid medication following continued use and/or an increase in dosage of a short acting opioid more than 60 months post injury

Identify, Intervene and Remain Involved

By peeling back the onion one layer at a time, questions can be raised, physicians can be challenged and evidence based treatment guidelines can be used to confront the status quo.   The first step is to ask your workers’ comp PBM to identify claims that meet your triggers.   Once identified, intervene with the treating physician either directly, or through a formal peer review.  Once intervention is complete, remain involved until changes are complete.  

When preparing for settlement, it’s critical to work with an MSA partner who will serve as gatekeeper to identify the same triggers and  intercept problem claims before the MSA is prepared.  Working hand in hand, positive outcomes can be achieved for the elderly.   The process is simple.  Consistent execution is the key.

For more information on medical and pharmacological issues related to pain management in the elderly population, I encourage you to review the publications made available by the American Geriatrics Society  (  For questions related to pain management issues related to Medicare Set Asides, email us at


Opioid Therapy: Red Flags That Warrant Intervention

February 24, 2014

Signs that opioid therapy is being abused in a workers’ compensation claim can be difficult to pinpoint. The behavior may not seem consistent due to the nature of the injury, so sometimes it can go undetected.  This article provides 5 basic criteria to assist in recognizing potential abuse in opioid therapy…

“Early warning signs of potential abuse or misuse frequently go unnoticed because some characteristics seem insignificant when considered in isolation. However, when multiple attributes are combined, they can reveal serious risks for inappropriate drug utilization. In order to identify characteristics that should raise red flags, the prescription data must be monitored from multiple perspectives.”

With a Pre-MSA review model that evaluates medical records from all prescribers with the Rx filling history from all sources to identify potential intervention triggers, Tower MSA Partners seeks to identify and address issues before MSA and settlement, and to remain involved until resolution is achieved.  The 5 triggers included in this article are among the behaviors / triggers we seek to identify with each claim,  and are a great starting point to build you own criteria to stage claims for early intervention.

Click here for the full article

Recent Study Links Opioid Use to Escalation in Overall Claim Cost

September 23, 2012

Opioid cause of escalation in claim cost
Opioid cause of escalation in claim cost
The over-prescribing of opioids and subsequent problems of addiction, overdose and even death is a public health crisis that has dramatically impacted workers’ compensation. A startling 55 to 85 percent of injured workers receive narcotics for chronic pain.

A recent study by Accident Fund Holdings and Johns Hopkins University examined the interrelationship between the utilization of short- and long-acting opioid medications and the likelihood of claim cost escalating to a catastrophic level (> $100,000). Analyzing 12,000 workers’ compensation claims in Michigan during a four-year period, the study focused on whether the presence of opioids alone accounted for the cost increase or whether costs increased because opioids were associated with known cost-drivers, such as legal involvement and injury severity.

Controlling for factors of sex, age, time lost from work, number of distinct ICD-9 codes per claims and legal involvement, results showed that opioid use – particularly of long-acting (LA) opioids – was an independent predictor of catastrophic claims costs.  Key findings:

  • The presence of LA opioids makes claims almost 3.9 times more likely to have a final cost of >$100,000 than a claim without any prescriptions.
  • Claims with only short acting (SA) opioids were 1.76 times more likely to have an ultimate claims cost of >$100,000.
  • Claims with non-opioid prescriptions showed no significant risk of exceeding $100,000 int total claim cost.

When assessing the price of opioid medication as it related to total medical and overall claim cost, the study found that the price of the drug itself was a minor contributor to the overall medical or total claims cost. SA opioids represented 0.3 percent of overall medical cost and 0.1 percent of overall claim cost, while LA opioids were approximately 3 percent of medical and 1.2 percent of total claim cost.

Strategies to Mitigate the Impact of Opioids

In the context of such clear and objective evidence that the use of opioid medications, particularly long-acting opioid medications, is an independent risk factor for the development of catastrophic claims, how do we now view the costs associated with proactively addressing addiction issues? Are cognitive behavioral and rehabilitation programs more reasonable strategies in light of these findings? How do we mitigate cost, facilitate settlement and provide better care?

The study’s findings reinforced Accident Fund’s decision to increase medical management on claims with opioids. “Our strategy consists of three elements: early detection, intervention and escalation,” said Jeffrey Austin White, MS, the study’s lead researcher and Accident Fund Holdings’ Director of Medical Management Practices and Strategy. “Leveraging technology solutions to identify opioid risk factors as soon as possible, establishing peer-to-peer intervention strategies based on case-specific needs and escalating internal workflows when specific triggers are met have improved patient outcomes and reduced costs.”

Applying Lessons Learned to Pre-Settlement Workflow

We at Tower MSA Partners applaud Accident Fund’s pro-active, enterprise-level approach to address opioid overutilization and applaud its success. We also recognize that the industry needs state-level pain guidelines. “Statutory support would provide a more comprehensive and general solution for managing opioid claims, until then, every opioid claim seems to require an individual approach with no guarantees,” White added.

Until states provide leadership through regulatory reform, what can payers do? While pain management is necessary, the abuse of opioids can cause hazardous, life-threatening side effects — for which payers may be held responsible.

PBM reports that identify chronic opioid use are available. Yet how do we get the appropriate information into the hands of those who can – and will – act on it? What is the appropriate action to take for each claimant? Are there jurisdictional requirements to meet when intervention is warranted? When (and by whom) should contact be made to the treating physician? How do we get treating physicians to modify drug therapy? Who follows through to verify that the drug regimen actually changes?

These are questions Tower MSA Partners addresses daily as part of its Pre-MSA Settlement Services. We work with clients to “stage” claims for settlement as early as possible. We define intervention triggers, initiate peer-to-peer contact with the treating physician when triggers are met, and obtain written agreement when treatment changes are approved. Most importantly, we stay involved to make certain positive outcomes are achieved. For information on the Accident Fund/Johns Hopkins study, “The Effects of Opioid Use on Workers’ Compensation Claim Cost in the State of Michigan,” please go to (subscription required.) For more information on Tower MSA Partners’ Pre-MSA Settlement Services, contact us at

The Rising Cost of Opioid Narcotics In Workers Compensation

June 23, 2012

New studies and research on Narcotics In Workers’ Compensation.

The  American College of Occupational and Environmental Medicine states, “the overuse of opioid therapy to treat chronic pain conditions is becoming epidemic in the United States,” and, “there are many treatments that should be considered before opioids”. According to this organization:

  • “Opioids are  becoming more controversial in large part because of … markedly elevated eath risks that have paralleled increases in consumption of opioids narcotics)”
  • “Routine use of opioids for the treatment of chronic nonmalignant pain conditions is not recommended”
  • “Opioids are recommended for select patients with chronic persistent pain, neuropathic pain, or CRPS (complex regional pain syndrome).”

Two years ago, NCCI released a study on the use of narcotics in workers compensation. Findings from that study include the following:

  • There is a correlation between drug abuse treatments and heavy narcotic use
  • There has been an increase in early narcotic use
  • The use of narcotics can continue for many years

In the update released on June 5, 2012, changes and key trends identified by NCCI were as follows:

  • Per-claim narcotic costs have increased
  • There have been changes in which narcotics are most commonly used
  • Narcotic use is concentrated among a small percentage of claimants
  • Initial narcotic use is indicative of future use

Overall Trends

The study begins with a look at the average narcotic cost per workers compensation claim with medical transactions. NCCI found that per-claim costs grew steadily from 2001 to  2004, remained fairly flat for a few years, and then increased in 2009. From 2001 to 2004, per-claim narcotic costs grew at an average of 18 percent per year. From 2004 to 2008, per-claim narcotic costs grew at an average of 1 percent per year. While there has generally been lower growth in recent years, the narcotic cost per-claim in 2009 is 14 percent greater than it was in 2008.

Narcotic use in workers compensation is becoming more common. In 2001, 28 percent of all claimants with medical transactions received at least one prescription drug within one year following injury and 8 percent received narcotics. In 2008, these numbers increased to 38 and 13 percent respectively. This implies that in 2008, over one-third of claimants with prescriptions received narcotics, up from 27 percent in 2001.

 Trends in Active Ingredients

NCCI identified seven active ingredients that account for more than 95 percent of the total cost of narcotics used in workers compensation. These include: morphine sulfate, oxymorphone, fentanyl citrate, fentanyl, oxycodone, oxycodone with acetaminophen, and hydrocodone BIT with acetaminophen.

The only major shifts in market share by active ingredient over the past few years have been a simultaneous reduction in the use of Fentanyl Citrate and an increase in the use of Oxymorphone HCL. While Oxymorphone HCL has been available through an injection since 1959, it only became available as an oral tablet in mid-2006.

Narcotic Consumption Among Claimants

Narcotic use in workers compensation is highly concentrated among a small percentage of claimants.  The narcotics consumed by the top 1 percent of claimants receiving narcotics accounts for close to 40 percent of all narcotic costs; the narcotics consumed by the top 10 percent of claimants receiving narcotics accounts for about 80 percent of all workers compensation narcotic costs. While narcotic use is highly concentrated, NCCI also noted a slight downward trend in the share of narcotic costs for the top users.

Tracking Morphine Equivalent Dosage (MEQ)

NCCI first investigated the persistence of narcotic use in workers compensation in 2009 and found that, while the probability of continued use declined with time, narcotic use could continue for many years. This study expands the 2009 analysis by investigating the relationship between the amount of narcotics initially consumed and the persistence of their use by tracking each drug based on its respective morphine quivalent dosage (MEQ).

Example:  According to, the usual adult dose for time-released Oxycodone (OxyContin®) is 10 mg orally every 12 hours.  Assuming a claimant consumes 10 mg pills:

  • 100 MEQ is equivalent to approximately 7 tablets of 10mg OxyContin®
  • 370 MEQ is equivalent to approximately 25 tablets of 10mg OxyContin®
  • 825 MEQ is equivalent to approximately 55 tabletss of 10mg OxyContin®

In its findings NCCI first noted that early narcotic use was indicative of  long term use with the average MEQ per claim receiving narcotics increasing with claim maturity. Second, NCCI found that the MEQ ranking was maintained in subsequent quarters; for example, those claims defined the by highest MEQ in initial use maintained its higher-than-other-claimant status throughout the life of the claim.

Conclusions and Commentary

Pain management is a necessary part of the worker’s compensation rehabilitation process, but the abuse of opioids can cause hazardous, life-threatening side effects for which payers may ultimately be held responsible. Payers who track and identify use patterns can better uncover any potential abuses before they become a litigious issue.

PBM reports that identify triggers such as chronic opioid narcotic use, high dollar narcotic spend, multiple physicians, multiple pharmacies are widely available across all providers.  With this level of information regarding claimants at risk readily available, why then does the opioid narcotic issue appear to be getting worse?  It is my belief that there is a disconnect between the information and the action.

How do we get the appropriate information into the hands of those who can, and will,
act on it?  What is the appropriate action to take for each claimant?  Are there jurisdictional requirements that must be met when intervention is warranted?  When and by whom should contact be made to the treating physician?  How do we get the agreement from the treating physicians to modify treatment?  Who follows through to verify that treatment is modified?

The items listed above are a subset of the many questions we ask at Tower MSA
Partners with every referral.  We work with clients to ‘stage’ claims prior to settlement and the MSA, and to address medical, pharmacy and legal issues as early in the claims process as possible.  We contact the treating physician when changes are needed and obtain written agreement.  We then follow through to make certain the changes are made and outcomes are achieved.

When physicians refuse to modify treatment, we also work with clients to identify specific, jurisdictionally approved strategies to obtain positive outcomes.  Depending on state of jurisdiction, we assist clients to challenge treatment, pursue a change in treatment  provider, close formularies, initiate dispute resolution, send the claim through utilization review, etc.

Potential strategies to address the rising problem with opioid narcotics involve 4
critical steps:

  1. First, establish the internal triggers you wish to track;
  2. Be proactive in identifying cases that meet your triggers;
  3. Act on the information;
  4. Follow through.

NCCI’s full report on opioid narcotics in workers’ compensation can be found at NCCI: Narcotics in Workers Compensation