Study: Drug Formularies Could Cut Workers’ Comp Costs by $420M
Implementing a closed prescription drug formulary in California's workers' compensation program could cut pharmaceutical costs by up to $420 million annually, according to a report by the California Workers' Compensation Institute, the Insurance Journal reports.
Details of Report
Drug formularies are standardized lists of approved prescription medications that workers are allowed to use. In some cases they can limit variability in prices (CWCI release, 10/6).
For the report, CWCI researchers applied 1.6 million workers' compensation prescriptions filled in California from Jan. 1, 2012, to June 30, 2013, to state-mandated formulary systems used in Texas and Washington. There currently is no drug formulary for California's workers' compensation program (Jergler, Insurance Journal, 10/7).
By applying the Texas and Washington formularies in California, total pharmaceutical payments could be cut by between 12% and 42% -- or $124 million and $420 million -- per year (Harrison, Business Insurance, 10/7).
Specifically, the study found that using the Texas formulary in California would exclude:
- 17% of the prescriptions; and
- 29% of the payments.
Meanwhile, the Washington formulary would exclude:
- 39% of the prescription drugs; and
- 70% of the payments.
As a result, payments for brand-name drugs would be reduced by between 42% and 95%, while payments for Schedule II opioid painkillers would be cut by 65% to 78%.
Potential Formulary Adoption
CWCI President Alex Swedlow said he is "aware of discussions" among officials within California's workers' compensation system over whether to adopt a mandated formulary.
According to the Insurance Journal, establishing such a formulary in California would not require action from the state Legislature. Instead, it could be done through regulatory changes by the state Division of Workers' Compensation.
Mark Walls, vice president of communications and strategic analysis at Safety National, said insurers are interested in adopting a formulary as a way to drive down costs and stem opioid misuse.
However, the system could face opposition from prescription drug manufacturers, according to the Insurance Journal (Insurance Journal, 10/7).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.