January 06, 2015

Opening the Door for Closed Formularies?

, Network Solutions

The doctor-patient relationship has long been believed to be a one-way street – the patient receives treatment from the physician, thus influencing the patient’s behavior/lifestyle. However, with the recent success of the closed formulary in Texas, it is becoming evident that physician behavior can be influenced by each visit as well.

Prospective pharmacy utilization management begins in the doctor’s office – starting the moment the prescription is written. Based on which drugs are available via a closed formulary, in addition to legislative restrictions and insurance policies, physicians’ prescribing behavior evolves, according to industry experts.

A closed drug formulary does not allow coverage of any cost of non-formulary drugs, unless with special exemption. This gives the operating body (payor) more control over which prescriptions are being filled by injured workers, as well as – consequently – what drugs are being prescribed by treating physicians.

The Texas Department of Insurance’s design and execution of the closed formulary methodology lends itself as substantial evidence supporting the impact of prospective management.

Because of the state’s closed formulary and requirement for pre-approval for all “N” status drugs (drugs that are generally not recommended for use and require preauthorization), prescribers in Texas are changing their prescribing behavior. The results of a recent Workers Compensation Research Institute (WCRI) study suggest that a closed formulary could reduce costs in other states as well. 

A study conducted by the California Workers’ Compensation Institute shows that adopting a state-mandated workers’ comp prescription drug formulary similar to the ones existing in Texas and Washington could reduce California’s workers’ compensation pharmacy payments by an estimated $124 million to $420 million a year while simultaneously raising the quality of care.

WCRI Study Results - June 2013

• New claims with non-formulary drugs that required preauthorization decreased by 67%
• Prescriptions for non-formulary drugs decreased by 70%
• Non-formulary drugs’ share of total prescription drug costs for new claims decreased by 80%
• Prescriptions for drugs included in the formulary decreased by 4%
• Total opioid prescriptions fell by 10%

Under a closed formulary, certain drugs – whether they are narcotics, brand name or containing an ingredient that the employer wishes to exclude – are not included among the available drugs. As such, treating physicians who may be susceptible to regular habits of prescribing brand name drugs, will have to seek alternative options for their patients given the insurance limitations on the formulary, or the limitations imposed by the Pharmacy Benefits Manager. Further management is thus perpetuated through the prescriber’s decision making.

Those opposed to a closed formulary argue that due to the uniqueness of each patient and each injury, a one-size-fits-all formulary will not be successful.  To that we believe that a state-mandated formulary does not try to impose regulation to which the injured worker must fit, but rather, influence prescribers to research and find appropriate treatment within pre-established guidelines.

With this model, while the behavioral change occurs retrospectively, the impact imposes prospective change of future prescribing behaviors helping contribute to increased payor savings.

Learn more about CorVel’s prospective pharmacy management.