Author: Ian Kea – Legislative Analyst
Injured Workers Pharmacy (IWP)
Workers’ compensation injuries vary significantly in terms of severity, treatments, and return to work outcomes. Some injured workers may need simple medical treatment, while others could require surgeries or even long-term care. With different types of injuries and duration of claims, certain states turned to medical treatment guidelines and adopted closed drug formularies in an attempt to manage drug costs. States may develop their own specific state treatment guidelines, as seen in Arkansas, Delaware, Colorado, Louisiana, Massachusetts, Minnesota, New York, North Carolina, Washington, West Virginia, Wisconsin, and Wyoming. Other states may opt for professional standard organizations, including the Official Disability Guidelines (ODG) from MCG or the American College of Occupational and Environmental Medicine (ACOEM) as seen in California and Nevada. As of now, eleven states adopted ODG treatment guidance or closed formulary protocols, including Arizona, Indiana, Kansas, Kentucky, Montana, New Mexico, North Dakota, Ohio, Oklahoma, Tennessee, and Texas.
Florida has not adopted a closed drug formulary or medical treatment guidelines. Nonetheless, the state’s three-member panel that reviews workers’ compensation issues recommended a potential change. The panel, in its annual recommendations, suggested that adopting modernized treatment guidance under 440.13(14) could “add clarification and remove excess administrative burden on both the payor and provider communities …and… reduce litigation (petitions for benefits) requesting authorization for medical procedures, services, and medicine.” In response to the panel’s endorsement, ODG held a webinar earlier this month to examine how a formulary in Florida may be implemented. However, any serious discussions regarding treatment guidelines will likely be pushed into 2024 as the state’s legislative session is scheduled to conclude in less than 30 days.
Treatment guidelines aim to utilize evidence-based medical literature, editorials, and clinical studies to generate the protocols. Organizations like MCG leverage specific data to help determine the appropriateness of treatment methods and medical diagnoses. For example, ODG’s formulary classifies certain drugs as “Y” or “N.” Drugs designated as “N” would require prior authorization (PA), whereas “Y” drugs do not. These determinations may be beneficial for some medical providers who write for and dispense prescriptions to lessen administrative hurdles in the reimbursement process. However, some providers find the medication guidance to be overly restrictive and potentially harmful to certain patient populations, including those with chronic or intractable pain.
Recent evaluations of drug formularies produced mixed results. A 2022 report observed that six out of the ten states that adopted the ODG formulary had the lowest premium rates. Prior studies from the National Council on Compensation Insurance (NCCI) in 2019 and the Workers’ Compensation Research Institute (WCRI) in 2016 demonstrated a combined potential average of a 24.5 percent reduction in what they termed “unnecessary pharmaceutical costs.” However, the latest research from WCRI released in early April, found formulary implementation results differ significantly by state.
State-specific formularies in New York and California immediately impacted prescribing habits. States that more recently adopted ODG like Indiana, Kentucky, and Montana saw little to no effect from their formulary implementations. Findings from Indiana confirmed that the formulary implementation “had very little impact on prescribing.” Meanwhile, Kentucky’s post-formulary numbers “remained relatively the same” to pre-formulary figures. In Montana, post-formulary implementation results found a 1 percent decrease in prescription costs and an increase in “N” drug utilization, according to a NCCI’s 2021 review. NCCI’s data also indicates that opioid utilization rates were higher in states with formularies compared to non-formulary states. When evaluating longer-term formulary outcomes in Arizona and Tennessee, both states saw stagnant success with their implementations. Arizona and Tennessee’s percentage change in total drug costs and the percentage change in drug prices post-formulary implementation were comparable with non-formulary state averages.
Balancing the clinical appropriateness of medications with cost-containment measures is a lofty goal for industry stakeholders. Advocates of closed drug formularies believe the setup strikes a fair balance, touting accomplishments in large states such as Texas. A 2016 report from the state’s Department of Insurance found that employers saved over 70 percent on premium rates and cut medical costs by 30 percent, all while seeing denial rates cut by 50 percent following the state’s ODG formulary implementation. ODG’s consistent reductions in “N” drug utilization can also be viewed as mitigating potential patient safety risks. Per the Mitchell Group, “formularies can significantly reduce the workers’ compensation system drug spend while ensuring appropriate and effective drug therapy is prescribed.”
For provider groups like the Physician Research Institute (PRI) “there is nothing inherently wrong with medical treatment guidelines, as long as they remain ‘guidelines’ rather than inflexible rules.” PRI further emphasizes that “a doctor will usually follow accepted treatment guidelines” but knows when a particular guideline is not appropriate from a clinical point of view or for the patient in front of the doctor. Unfortunately, insurance adjusters do not have clinical expertise nor are they treating a particular individual. Hence, in the insurance world, ‘guidelines’ become inflexible rules and that is the problem which doctors and their patients face.”
With legislators and regulators looking to 2024 as the 2023 session winds down, any contemplated approach to treatment guidelines needs to balance considerations of cost containment, clinical flexibility and judgment, and injured workers’ access to needed care.