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On October 6, 2015, Governor Jerry Brown signed Assembly Bill No. 1124 into law, which directed the DWC to adopt an evidence-based drug formulary in the California workers’ compensation system.

In 2017, the DWC adopted the new drug formulary linked to the California Medical Treatment Utilization Schedule (MTUS) to be effective on January 1, 2018. The drug formulary intends to reduce frictional costs mostly from UR and independent medical review (IMR); restrict inappropriate prescribing, especially that related to opioids; and ensure medically necessary and timely medications for injured workers.

The drug formulary includes an MTUS drug list of about 300 drug ingredients that are assigned a status of exempt or non-exempt from prospective UR.

All opioids and compounded drugs are non-exempt from prospective UR. Additionally, certain non-exempt drugs can be prescribed without prospective UR if fulfilling the requirements of special fill or peri-operative fill policies.

Drugs not listed on the MTUS drug list must obtain authorization through prospective UR prior to dispensing

Even before the implementation of the drug formulary, pharmaceutical costs in California had been declining sharply. Key drivers of the decrease include Senate Bill No. 863 reforms related to IMR and spinal surgeries, changes in the federal government upper-limit pricing levels, anti-fraud efforts and the public reaction to the national opioid epidemic.

While there was an even more significant drop in the utilization and cost of pharmaceuticals in 2018, it was not immediately clear how much of the decline was due to the formulary and how much was due to the continuation of the factors driving the prior year decreases

The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) reviewed the impact of the new drug formulary on prescribing patterns and pharmaceutical costs based on pharmaceutical transaction information through the first year of implementation.

The WCIRB’s findings include:

— The share of prescriptions of drugs not subject to prospective utilization review (UR) in accordance with the formulary increased by 41 percent compared to the pre-2018 level, while that of drugs subject to UR declined by 18 percent.

— The use of opioids, compounds, physician-dispensed drugs and brand-name drugs with generic alternatives dropped sharply in 2018, the first year of the formulary.

While a number of the aforementioned pharmaceutical components had been declining prior to the implementation of the formulary, the decline accelerated during 2018, suggestive of the effect of the drug formulary.