Drug Formularies: The Latest Trend in Workers’ Compensation Programs

Concerned about reducing prescription costs and the amount of opioids being prescribed, workers’ compensation programs around the country are trying a new strategy: drug formularies. Simply put, a drug formulary is a list of prescription drugs covered by the patient’s insurance plan. Medications that are not covered (“N drugs”) require the physician to explain the medical necessity of the drug in order to obtain coverage. If the insurer won’t approve the drug, the patient must pay for the drug another way or accept something else.

Drug formularies are not new in insurance, but they are somewhat new in workers’ comp. Interest in formularies spiked after 2011, when Texas successfully implemented its workers’ comp formulary to great effect. Since implementation, Texas has reported significant savings in prescription medication costs, as well as decreased prescriptions for opioids and other narcotics. For example, the number of N-drug prescriptions in Texas workers’ comp cases decreased from 335,077 in 2009 to 26,701 in 2015, a cost savings of approximately $44 million.

Many other states now have formularies in their workers’ compensation programs, including Arizona, Delaware, North Dakota, Ohio, Oklahoma, Tennessee, Washington and Wyoming. California is scheduled to decide its coverage list by July 2017, and New York, North Carolina and Louisiana are all looking into formularies as well.

Despite the welcome reduction in both costs and opioid prescriptions, formularies do have their drawbacks. Common complaints include delayed treatment, interference with doctor recommendations, and administrative glitches and burdens that affect patient care. In response, the American College of Occupational and Environmental Medicine published recommendations last August for formulary best practices. The group’s aim is to help legislators and workers’ comp managers create formularies that maintain, if not improve, the quality of care for injured workers. As an example, industry experts estimate that about 25 percent of California’s currently prescribed workers’ comp medications could be put on the fast track for approval, which would help avoid delays in patient treatment.

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