As more and more states look for opportunities to manage prescription drug utilization in their Workers Compensation (WC) systems, closed drug formularies continue to receive increased attention as a tool for managing the utilization of prescription drugs. One of the key components is to provide evidence-based guidance to physicians when prescribing drug treatments for injured workers. One such formulary, which has been implemented in several states, is the Official Disability Guidelines Workers’ Compensation Drug Formulary (the ODG Formulary).
Using data from NCCI’s Medical Data Call, this report examines changes in price and utilization trends in WC prescription drug experience following implementation of the ODG Formulary for two different sets of states:
- States which recently adopted mandatory use of the ODG Formulary: Indiana, Kentucky, and Montana. For these states, we look at pharmacy utilization trends before and after the formulary implementation.
- States where the initial impacts of formulary implementation were first studied by NCCI in 2019: Arizona and Tennessee. For these states, we focus only on post-implementation trends to observe longer-term impacts of the drug formulary.
To the extent possible, post-reform experience in each state is compared against a control group of nonformulary states in an attempt to isolate any effects specific to the formulary.
KEY FINDINGS—INITIAL IMPLEMENTATION EFFECTS (IN, KY, MT)
- Decreased utilization of drugs contributed to overall cost declines in each of the three states in the period immediately after formulary implementation.
- Post-reform decreases in drug costs for each state were comparable to decreases in overall drug costs observed in nonformulary states for the same periods.
KEY FINDINGS—CONTINUED IMPLEMENTATION EFFECTS (AZ, TN)
- Overall drug costs decreased in each of the subsequent post-reform periods for both states. Overall cost declines were driven by decreased utilization of drugs, with a more significant decline in the utilization of drugs requiring prior authorization (N-drugs) relative to those that do not require prior authorization (Y-drugs).
- Opioid utilization declined by more than 20% in each post-reform period for both states; however, similar declines in opioid utilization were observed in nonformulary states for the same periods.
- Utilization of topicals continued to decrease in Tennessee in the post-formulary periods while the share of topicals increased in Arizona.
Payors (i.e., insurers) in nonformulary states may use some prescription drug management practices when authorizing certain drugs despite the lack of a state-mandated drug formulary. The utilization of a formulary is a behavioral phenomenon and thus the resulting experience depends on the extent to which such formulary is used to make prescribing decisions by the physician, the insurer, and the injured worker.
Please note that the findings in this report are largely observational, rather than inferential. More specifically, there are several confounding factors that could not be controlled for, preventing statistically rigorous inferences regarding the overall impact of the drug formulary in each state. Such factors include:
- The impacts of other legislative changes affecting the WC system
- The degree to which settlement of future medical benefits occurs in each state
- The presence and effectiveness of nonformulary prescription drug management measures, such as fee schedules, required use of generic drugs, pharmacy benefit managers, state prescribing rules, prescription drug monitoring programs, and medical provider networks
- Restrictions on repackaging and physician dispensing of prescription drugs
- Types of injuries and the associated severity
- Treatment guidelines accompanying the formulary, if applicable
Along with the heightened awareness of the opioid crisis and attempts to lessen opioid misutilization in the WC system, these factors are likely to have impacted prescribing patterns in each group of states (e.g., formulary and nonformulary) quite differently. While the reader may be inclined to draw definitive conclusions regarding the overall impact of the formulary in each state, any such conclusions would need to account for factors that are not readily identifiable.
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