California Assembly Bill 1124 required the state's Division of Workers' Compensation to establish a formulary for all drugs provided to injured workers under the state's workers' compensation program. To aid in that effort, this report compares and evaluates the strengths and weaknesses of existing state workers' compensation formularies and analyzes the issues and options for structuring and implementing an evidence-based formulary.

Cover: Implementing a Drug Formulary for California's Workers' Compensation Program
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Implementing a Drug Formulary for California's Workers' Compensation Program

by Barbara O. Wynn, Christine Buttorff, Erika Meza, Erin Audrey Taylor, Andrew W. Mulcahy

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Research Questions

  1. How should the drug formulary be structured? What are the advantages and disadvantages of existing formularies that the California workers' compensation program might consider?
  2. What implementation policies should be considered to address the Labor Code requirements for an evidence-based formulary and promote the provision of appropriate pharmaceuticals expeditiously while minimizing administrative burden?
  3. What steps does the Division of Workers' Compensation need to undertake to design and implement the drug formulary? How would they differ based on whether an existing formulary is adopted or a formulary is developed from California's Medical Treatment Utilization Schedule (MTUS) guidelines?

California Assembly Bill 1124 required the state's Division of Workers' Compensation in the Department of Industrial Relations to establish a drug formulary for all injured workers covered by the state's workers' compensation program. Such formularies serve to reinforce safe and effective prescribing patterns for practitioners and payers. In California, the formulary will need to be consistent with the Medical Treatment Utilization Schedule guidelines that define medically appropriate care for California's injured workers, create incentives to encourage prescribing of medically appropriate drugs, and reduce the administrative burdens associated with utilization review and medical necessity disputes. The objective of this report is to support the Division of Workers' Compensation in establishing the formulary. The authors compare and evaluate the strengths and weaknesses of four existing formularies and the formulary used by California's Medicaid program. The authors then analyze the issues involved in structuring the drug formulary for California to be consistent with the treatment guidelines, explore related policies that should be addressed in implementing the formulary, and offer recommendations.

Key Findings

The Division of Workers' Compensation (DWC) Will Need to Weigh the Benefits of Remaining Consistent with the Current MTUS Structure Against the Ease of Implementing the Formulary

  • To remain consistent with the MTUS guidelines, DWC will need to either adopt existing the guidelines and formulary (the Work-Loss Data Institute's ODG or The Reed Group's ACOEM) or derive the formulary drug listing from MTUS guidelines.
  • The existing sources have advantages and disadvantages. The ODG guidelines are more comprehensive and updated regularly. The formulary drug listing has prospective review (PR) requirements and could be implemented off the shelf. The MTUS guidelines for chronic pain are based on ODG, although most MTUS guidelines are based on ACOEM. The ACOEM guidelines have a more rigorous development process but are less comprehensive. Updates occur every three to five years. The drug recommendations are condition-specific, with no PR requirements. DWC would need to develop a formulary drug listing and PR requirements.
  • The MTUS guidelines are outdated. An MTUS formulary would require updating the guidelines; developing a formulary drug list and PR requirements; and, if the current multisource structure is retained, integrating guidelines from different sources into a single formulary.
  • The Labor Code's different administrative processes for updating the treatment guidelines and the formulary pose challenges for maintaining currency and consistency between the guidelines and formulary recommendations.

Recommendations

  • The MTUS guidelines should drive decisions on the formulary structure so that both treatment guidelines and the formulary incorporate the evidence-based standards of care that best meet the needs of California's injured workers. Priority should be given to updating the MTUS guidelines. In doing so, the advantages and disadvantages of retaining the current multisource guideline structure should be weighed.
  • The formulary drug listing and prospective review (PR) requirements should be derived from the MTUS guidelines in effect as of the implementation date. Generally, PR should be waived for recommended drugs that are first-line therapies or that are otherwise low-cost, low-risk drugs that are prescribed consistent with the MTUS guidelines. Condition-specific PR requirements should be imposed sparingly when there are significant differences in the drug recommendation.
  • DWC should also consider the following: a first-fill policy that waives PR for drugs prescribed immediately following injury, including a short-course of opioid therapy for severe pain; requiring PR if a brand name drug is prescribed when a generic equivalent is available at lower cost.
  • The formulary should incorporate cost considerations over time through the Pharmacy and Therapeutic Committee's review activities.
  • Consideration should be given to revising the Labor Code to provide DWC with authority to post changes in the MTUS treatment guidelines for drug therapies simultaneously with changes in the formulary without rulemaking.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    An Overview of Outpatient Drugs Furnished to Injured Workers

  • Chapter Three

    Comparison of Existing Drug Formularies

  • Chapter Four

    Comparison of Formulary Ground Rules

  • Chapter Five

    Formulary Implementation Policies

  • Chapter Six

    Formulary Updating Process and Policies

  • Chapter Seven

    Preliminary Implementation Plan

  • Appendix A

    Detailed Methods and Results for Chapter Four

  • Appendix B

    Example Formulary

The research reported here was conducted in the RAND Institute for Civil Justice (ICJ), a part of the Justice Policy Program within RAND Justice, Infrastructure, and Environment.

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