The Texas Formulary: August A Look at History, Current Impact, and Future Expectations. Background

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1 The Texas Formulary: A Look at History, Current Impact, and Future Expectations August 2012 Background Heading into the 21 st century, the Texas State Workers Compensation program, also known as the Texas Department of Insurance, Division of Workers Compensation (TDI-DWC), found itself facing doubledigit cost increases while, at the same time, injuries were decreasing. 1 The Texas government realized that reform was needed in order to contain spend that was quickly spinning out of control. In response to the workers compensation cost increases, House Bill 7 (HB7) was introduced during the 79 th session of the Texas Legislature to reform the administration of the workers compensation system and implement major changes in the delivery of benefits to injured workers. During the rulemaking process, the TDI-DWC requested input from workers compensation system participants, including the Texas Medical Association, Texas Osteopathic Medical Association and the Texas Pharmacy Association. 2 Full of requirements and provisions, including the use of health care networks similar to those found in group health insurance, HB7 was passed in 2005, and its rules were adopted by the TDI-DWC in December Another significant change required by HB7 was the adoption of a closed drug formulary. Prior to the approval of the closed formulary, the state of Texas paid for all FDA-approved medications, regardless of the indication for use. With the collaborative input received, the closed formulary was anticipated to bring about drug prescribing consistency in both certified workers compensation health care network and nonnetwork claims. 3 The Texas Formulary is based upon the recommendations outlined in the Official Disability Guidelines (ODG). If a drug is prescribed that is outside of the ODG recommendations, then a Preauthorization (PA) is required to evaluate medical necessity for the excluded drug. A PA is required for any drugs designated as N under the ODG, meaning those drugs are considered experimental, investigational, or not recognized for use in treating a particular injury or condition. 4 The actual wording of the rules regarding the closed formulary is as follows: 5 All available Food and Drug Administration (FDA) -approved prescription and non-prescription drugs prescribed and dispensed for outpatient use with some exclusions: Exclusions from the Closed Formulary: drugs with N status identified in the current edition of the Official Disability Guideline (ODG) Treatment in Workers Comp/Appendix A, ODG Workers Compensation Drug Formulary and any updates any compounded drugs that contains a drug identified with an N status in ODG; and investigational or experimental drugs as defined in Texas Labor Code (a) The list of excluded medications ( N drugs) is updated monthly. The most recent information regarding which medications are on this list can be found at The implementation of the Texas Formulary was set to be completed in two phases, as shown in Figure 1. Beginning January 17, 2011, the first milestone occurred, which was the effective date of the open formulary. The next milestone was September 1, 2011, when the rules began taking two tracks. One track (orange) is the continuation of the open formulary for Dates of Injury (DOI) prior to September 1, 2011, also termed legacy claims. The second track (dark blue) is the effective date of the closed formulary and Medical Interlocutory Orders (MIO) for dates of injury on or after September 1, The third and final milestone (green) is September 1, 2013, which makes the closed formulary applicable for all claims regardless of date of injury. What do all of these milestones and timelines mean? Injuries occurring before September 1, 2011, also known as legacy claims, will not be subject to the closed formulary until September 1, Any injury that occurs after September 1, 2011 must utilize the closed formulary, or the prescriber must provide documentation to obtain preauthorization from the claims examiner. Documentation supporting the 1

2 Figure 1. Texas Closed Formulary Timeline *Except Old Law Claims (DOI Dec. 31, 1990 and before. **Medical Interlocutory Order medical necessity for the non-formulary prescription is forwarded to the appropriate claims examiner for approval or denial. If desired, the claims examiner may forward the request to Utilization Review (UR) to determine medical necessity. If UR determines the drug in question to not be medically necessary, the claims examiner can deny the request from the prescriber. If UR confirms medical necessity, the request would likely be approved. How Coventry Has Responded to the Texas Formulary Coventry Workers Comp Services (Coventry) through its Pharmacy Benefit Management (PBM) solution, First Script, is ensuring that Texas prescriptions are properly managed: 1. Drug lists have been revised so that all prescriptions with a Texas jurisdiction are compared to the closed formulary at the Point-of-Sale (POS). a. If the medication is not included on the formulary, a PA is sent to the claims examiner. 2. Utilization Review is available to determine medical necessity to assist the claims examiner with the approval or denial of any non-formulary drugs. 3. The updated Texas Formulary is reviewed monthly by the clinical team. Revisions are incorporated ensuring that Texas prescription processing utilizes the most current version of the formulary. For legacy claims, there are a number of important dates dictated by Texas law. As of September 1, 2011, Carriers and Third Party Administrators (TPAs) are permitted to request a letter of medical necessity from the prescriber for excluded drugs received for a legacy claim. However, there is no requirement for the prescriber to reply at this time. If there is a response, a licensed Texas Utilization Review doctor may discuss the medical necessity of the current therapy or alternatives with the prescriber. Beginning March 1, 2013 Carriers and TPAs will be required to send a notice regarding the need for a statement of medical necessity for any excluded drugs for a legacy claim. Again, there will be no requirement for the prescriber to respond. If the prescriber does respond, a peer-to-peer conversation as described above may take place. The final key date for legacy claims will be September 1, 2013, when the exemption for legacy claims expires. As of that date, PAs will be required for all excluded medications. Once a prescription for an excluded drug is received, Carriers and TPAs will be able to send requests for medical necessity. If there is an excluded drug prescribed prior to September 1, 2013, which has refills that will extend beyond that date, the Carriers and TPAs may send a request for medical necessity at any time after September 1, A letter to prescribers treating injured workers taking non-formulary drugs, requesting medical necessity and notification of the new formulary requirements after September 1, 2013, will be made available to all Coventry clients. The letter will be available for use until March 1, After March 1, 2013, a second letter will be available that explains UR options, and will fulfill the official notice requirements for the Texas law. This second letter will also invite prescribers to a conversation with a Texas UR doctor. In addition to the letter campaign, as of September 1, 2013, all of the actions currently in place for new claims will apply for legacy claims as well. Integrated clients (those utilizing the First Script PBM, UR, and Bill Review) will have the added benefit of a streamlined process, reducing the need for manual intervention. 2

3 The Impact of the Closed Formulary on Drug Prescribing Patterns Has the adoption of a closed formulary changed how providers are prescribing medications? The short answer is a resounding Yes, and the impact has been significant. In order to determine the influence of the Texas closed formulary on prescribing patterns, Coventry reviewed data for injuries that occurred within the six months prior to September 1, 2011 (legacy claims), and six months after (non-legacy claims). Specifically, the number of scripts for non-formulary drugs and the number of injured workers receiving those drugs were compared, and the results are illustrated in Figure 2. Additionally, the changes in spend were also calculated. For those injuries occurring during the six months after the implementation of the closed formulary, 64% less non-formulary drug scripts were written, 61% fewer injured workers received those excluded drugs, and 65% less was spent on them. A deeper dive into the data revealed even larger decreases for controlled substances excluded from the closed formulary, such as Soma, Xanax, and OxyContin. In fact, for those injuries occurring within six months after the implementation of the closed Figure 3. The number of injured workers receiving nonformulary controlled substances six months before and after September 1, Figure 4. The number of scripts written for non-formulary controlled substances six months before and after September 1, Figure 2. Texas non-formulary utilization six months before and after closed formulary initiation *No scripts written, therefore not represented in the After chart formulary, 71% fewer injured workers received excluded controlled drugs, 73% fewer scripts were written, and there was a 76% decrease in spend on these drugs. Graphical presentations of injured worker and script decreases are shown in Figures 3 and 4. Changes in the number of injured workers receiving excluded drugs, and the number of scripts written for excluded drugs, six months before the closed formulary implementation and six months after. A decrease of more than 60% in each category was observed after the closed formulary was initiated. In addition to the controlled substances, data regarding a collection of brand-only, non-narcotic pain medications was further reviewed. The group included Amrix, Lidoderm, Pennsaid, and Flector which were chosen due to their cost and popularity. Amrix is an extended-release version of the generically available muscle relaxant cyclobenzaprine. Pennsaid and Flector are topical versions of the Non-Steroidal Anti- Inflammatory Drug (NSAID) diclofenac, which is available generically in an oral tablet. Finally, Lidoderm is a lidocaine patch approved for shingles pain, but is widely utilized off-label in workers compensation for 3

4 nerve pain and lower back pain. Lidoderm is currently number two on the First Script Top Ten Workers Comp Drug List for 2011, and patents will expire towards the end of Additionally, a generic Lidoderm option may be available by the end of the year. As demonstrated in Figure 5, both the number of scripts written for these non-narcotic pain medications and the number of injured workers receiving these drugs dropped by 65% resulting in a spend decrease of 63%. In order to confirm that these results were related to the changes made by the state of Texas, we compared the Texas non-formulary drug trends with those in the other 49 states. A national decrease for scripts and injured workers receiving excluded drugs was discovered. However, the decreases in Texas were nearly three times larger than those seen in the rest of the country, as illustrated in Figures 6 and 7. While Texas saw differences of more than 60% in excluded drug utilization, the rest of the country realized only about a 22% decrease. A recent article published by the Texas Division of Workers Compensation (TDI-DWC) discussed trends in 2011 (after the formulary initiation) versus the previous year. The TDI-DWC data indicated reductions of 75% and 54% for non-formulary drug spend and injured workers receiving those drugs, respectively. 6 These findings also compare favorably with the Coventry results. Figure 5. Decreases in excluded brand-only, non-narcotics six months before and after closed formulary implementation. 4

5 Figure 6. Texas non-formulary utilization six months before and after the closed formulary implementation date of September 1, Figure 7. Excluded drug utilization (outside of Texas) six months before and after September 1, The Future of the Formulary The largest hurdle to jump regarding the Texas Formulary will be the integration of legacy claims. It will be a challenge to motivate prescribers to provide the required documentation for medical necessity or change to a formulary drug in advance of September 1, An ideal situation would include prescribers taking action upon the receipt of a notification letter, as it would spread out the potential workload required by all stakeholders prescribers, injured workers, claims examiners, PBM employees, etc. The backlog of paperwork is a valid concern as research indicates there are a lot of non-formulary drugs being prescribed for legacy claims. The Texas Department of Insurance Workers Compensation Research and Evaluation Group published a report in October 2011 showing that legacy claim prescriptions for claims occurring six or more years ago were, on average, nearly 14 times more costly per script than those claims that were five years old or younger. 7 As we move closer to the September 2013 date, it will be interesting to see how the Texas Formulary affects these claims. It will be worthwhile to determine if the current trends discussed earlier are maintained as our timeline moves further out from implementation. Assessing the impact of formulary adoption on return-to-work statistics, percent of disability cases, and even death rates 7 will also be of interest. We may even be able to determine whether or not a closed formulary can have a significant impact on patient safety and opioid dependence or abuse. References: This information has been prepared by Coventry Workers Comp Services for informational purposes only. Where applicable, information contained in this document is based on an interpretation, is not intended to be construed as legal advice, and does not represent the provisions of legislation or rules in their entirety. Readers should refer to their state laws, rules, and/or regulations for more information, and/or consult appropriate legal counsel Coventry Health Care Workers Compensation, Inc. All rights reserved. wcservices_information@cvty.com 5