AB-1124 passed the California legislature yesterday, and now awaits the expected signature of Governor Brown in order to become law. According to the author, this bill gives the Administrative Director clear authority to establish a formulary. An effective formulary will control rising prescription drug costs in California’s workers’ compensation system, limit the over-prescribing of highly-addictive opioids, and ensure injured workers get the necessary treatment needed to get back to work.

Drug formularies have proven to be very effective at managing the cost of prescription drugs. Health plans have been using formularies in California for decades and they are commonly accepted as a useful cost control mechanism. They control costs by limiting the utilization of high priced drugs and reducing the price of drugs. Formularies are usually developed by companies known as pharmaceutical benefits managers (PBMs) who design formularies and manage prescription drug benefits for a contracting health plan. At the most basic level a formulary is a list of drugs that a health plan or insurer agrees to cover. However, formularies are not simply arbitrary limits on drug use. Formularies must be broad enough to provide drug treatment options when they are available, and formulary decisions are guided substantially by the scientific evidence regarding individual drugs. However, in most cases there are multiple drugs available to treat a given condition and formularies are constructed to drive treatment choices to the most cost-effective option.

This bill would require the DWC Administrative Director to establish a drug formulary, on or before July 1, 2017, as part of the medical treatment utilization schedule.The Administrative Director would be required to meet and consult with stakeholders, prior to the adoption of the formulary, and publish at least 2 interim reports on the Internet Web site of the DWC. The bill would require the Administrative Director to update the formulary at least on a quarterly basis to allow for the provision of all appropriate medications, including medications new to the market.The bill would require the Administrative Director to establish an independent pharmacy and therapeutics committee to review and consult with the Administrative Director in connection with updating the formulary.

The California Applicants Attorneys Association argued against the law claiming that establishing a formulary is just another in a long line of take-aways from injured workers. Business groups supported this bill and the California Labor Federation supports the concept of a formulary.