In October 2015, Governor Brown signed Assembly Bill 1124 mandating that the California Division of Workers’ Compensation (DWC) adopt a prescription drug formulary for the California workers’ compensation system. The draft regulations published last week reflect a broad effort by the Division to streamline the delivery of effective care to injured workers by implementing the formulary and the 30-day pass-through utilization review (UR) provisions proposed under Senate Bill 1160 (Mendoza).

Studies by the California Workers’ Compensation Institute (CWCI) and the Workers Compensation Research Institute (WCRI) published before the new law estimated that depending on how it was structured and implemented, a state-mandated workers’ compensation formulary could save 8 to 42 percent of total drug spend,

At this point it remains to be seen what savings will actually materialize.

But, a new California Workers’ Compensation Institute (CWCI) study uses data from 1.2 million drug prescriptions dispensed to California injured workers in 2014 to model the impact of the draft Medical Treatment Utilization Schedule (MTUS) Drug Formulary released by the Division of Workers’ Compensation last week.

The draft MTUS Drug Formulary List classifies listed drugs as either “Preferred” or “Non-Preferred.” If prescribed in accordance with the state’s Medical Treatment Utilization Schedule for outpatient use, Preferred drugs would not have to be authorized through prospective review, while authorization via prospective review would be required before Non-Preferred drugs could be prescribed or dispensed. Drugs not on the formulary’s Preferred or Non-Preferred list, (“Not Listed” drugs), also would require authorization through prospective review prior to prescribing or dispensing. All opioids would be Non-Preferred, but the regulations would allow a limited “first fill” of 7 specific opioids if prescribed or dispensed at an initial visit within 7 days of the injury date and the prescription meets MTUS standards.

To test the impact of the draft MTUS Drug Formulary, the authors determined the percentage of the 1.2 million prescriptions and prescription dollars in the study sample that would fall into the Preferred, Non-Preferred, and Not Listed categories; identified the drug groups that would be most affected; and estimated the effect of the “first-fill” provision.

The model found that Preferred drugs comprise 26.6% of currently prescribed drugs and 22.0% of total drug spend; Non-Preferred drugs make up 57.0% of the prescriptions and 53.1% of the drug spend, while Not Listed drugs made up 16.4% of the prescriptions and 24.9% of the drug spend. The most-prescribed drugs that would be subject to prior review include opioids and certain bulk chemicals found in compound drugs. The model also found that the First Fill policy for the 7 opioids would affect fewer than 5% of current prescriptions.

Based on the preliminary analysis summarized in this report, the proposed formulary represents a significant step forward in achieving the legislative intent of AB 1124. In a follow-up report, the authors will provide a more in-depth analysis of the potential system-wide impact of the proposed formulary on UR and IMR expenses by comparing the specific drugs currently subject to UR and IMR, as well as dispute resolution outcomes, against the MTUS drug list.

CWCI plans a follow-up analysis that will examine the proposed formulary’s impact on system-wide utilization review and independent medical review (IMR) expenses by comparing specific drugs currently subject to UR and IMR and the outcomes of disputes involving those drugs against the formulary drug list. In the meantime, the initial study has been issued as a CWCI Spotlight Report, “California’s Proposed Workers’ Compensation Formulary, Part 1: A Review of Preferred and Non-Preferred Drugs,” and is available for free in the Research section at www.cwci.org.