Tuesday, March 7, 2017

What's Past is Not Prologue: Formularies Differ by State

I've recently heard predictions regarding California's forthcoming formulary that are based on the experience of Texas over the last five years.  Both are large states.  Both have well recognized, embedded utilization review processes.  And they have tertiary dispute resolution processes that, while not precise analogs, nonetheless look similar to one another (the Texas IRO process and the California IMR process).

So we might expect California, when it adopts it's drug formulary on or about July 1, to exhibit behaviors and results that are similar to the results Texas has achieved with its formulary (see my colleague Mark Pew's recent blog posts for insight into the CA timeline).  In Texas, prescriptions for "N" drugs fell by 81% and the costs for those same drugs dropped by 80%.  Total opioid scripts dropped by 8% and total drug costs in the state's work comp system fell by 15%.  All of this occurred with no discernible increase in loss adjustment expense (primarily, utilization review). So we might expect the same from California, right?  

I don't think so.  I offer three key data points in defense of that view:

First, the formularies are not the same.  Texas relies on Work Loss Data Institute's Official Disability Guidelines, Appendix A (which lists medications are either "N" or "Y" based on whether they are recommended for first-line therapy).  California has used as its starting point Reed Group's MDGuidelines in order to incorporate a formulary into MTUS.  The list of "non-preferred" drugs in these guidelines is a different, and frankly more restrictive, list than the ODG list of N drugs.  For instance, ODG has some opioid analgesics in the "Y" category.  The MDGuidelines categorized all opioid analgesics as "non-preferred." The two organizations take different approaches and I'm careful to avoid expressing preference for one or the other (PRIUM works closely with both sets of guidelines).  The important take-away here is that the two states are relying on different formulary approaches.

Second, about 38% of CA's lost-time claims have attorney representation.  That number for TX is 6%.  There are lots of reasons for this (attorney fee schedules come immediately to mind) that have nothing to do with formularies.  But adopting a formulary in a state with injured worker representation in the single digits is a fundamentally different proposition than adopting it in a state where 4 out of every 10 injured workers on indemnity have a lawyer.

Finally, loss adjustment expense in CA is already running at about 35% of total losses (which is 83% higher than the median in WCRI's latest study on LAE).  When the TX formulary came into full effect in 2013, the number of IRO decisions from 2013-2015 ranged in the 1200-1400 range per year over that three year period post-formulary implementation.  The number of IMR decisions in CA in 2016?  164,136.  And this is before the adoption of a formulary. Long term, as the prescriber community adjusts to the formulary list and its associated rules, the number of medication-related IMRs may in fact moderate.  But for the latter half of 2017, I wouldn't count on that happening.

Two different states, two different formularies, two different environments.  Beware of drawing conclusions regarding one based on the other.

On Twitter @PRIUM1

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