California’s drug formulary, which went into effect January 1, 2018, was intended to reduce frictional costs in the workers’ compensation system; restrict inappropriate prescribing, especially that related to opioids; and ensure that injured workers receive medically necessary medications in a timely manner.

In the July 1, 2018 Pure Premium Rate Filing, the WCIRB estimated that the drug formulary would reduce pharmaceutical costs by 10 percent, resulting in an overall 0.5 percent reduction in the advisory pure premium rate level.

The WCIRB’s initial estimate was based largely on projected reductions in the use of opioids, compounds, physician-dispensed drugs and brand name drugs when a generic alternative was available.

The WCIRB has updated the cost impact evaluation of the Drug Formulary, utilizing additional pharmaceutical transaction information in 2019 through the pre-pandemic period in 2020, in its Cost Impact of California’s Drug Formulary – Two-Year Checkup research brief.

Key findings in the research brief include:

– – While pharmaceutical costs had been declining sharply prior to implementation of the formulary, the decline accelerated in 2018 and continued at a somewhat slower rate through 2019 and the pre-COVID-19 period in 2020.
– – The share of prescriptions for drugs not subject to prospective UR in accordance with the formulary continued to increase in 2019 and early 2020, while that of drugs subject to UR continued to decline.
– – The share of pharmaceutical payments for opioids, compounds and brand name drugs with generic alternatives dropped sharply in 2018 and continued to drop at a similar rate in 2019 and early 2020.
– – While the share of pharmaceutical payments for physician dispensed drugs started to increase slightly toward the end of 2019, on an annual basis, the share of payments to these drugs continued to decline during the two years of the formulary implementation.
– – The continued downward trend in pharmaceutical costs through early 2020, as well as the continued decreases in the proportion of drugs not subject to UR, opioids, compounds, physician-dispensed drugs and brand name drugs with generic equivalents suggest the formulary is achieving its intended effects.

The COVID-19 pandemic and the resultant stay-at-home orders have affected the patterns of medical treatment of California injured workers. While elective medical services were suspended during the early weeks of the pandemic, pharmaceutical use has increased throughout the pandemic. The increases have driven the average drug payments in the system above the prepandemic level. Most of the increases came from non-opioid pain medications.

Given that the formulary impact on drug utilization and costs may be mixed with the impact of the stay-at-home orders during the ongoing pandemic, this updated evaluation focused on the pre-COVID-19 pandemic period and assessed how the drug formulary affected prescription drug utilization and costs during this period.