4 Lessons from New York’s Effort to Address Unnecessary Pharmacy Costs

Drug formularies play an important role in workers’ compensation. In simple terms, a formulary identifies medications that can be prescribed under established coverage rules. The goal is to help injured workers get appropriate treatment without adding unnecessary steps to the process.

In New York, the Workers’ Compensation Board oversees the state’s drug formulary and prior authorization process. If a medication is not on the formulary, the prescriber generally must request approval before it is dispensed. Medications on the formulary can typically move forward without that additional review.

That distinction created an unexpected problem.

Ingredients such as lidocaine, capsaicin, diclofenac, menthol, and methyl salicylate were included in the formulary because they are commonly found in inexpensive over-the-counter treatments. However, pharmaceutical manufacturers began offering these familiar therapies in different strengths and dosage forms at much higher prices. Since the medications were still considered formulary, some could be dispensed without the same level of review. CorVel saw topical and oral medications containing familiar ingredients billed at more than $6,000.

CorVel’s Pharmacy Services team began raising the issue with the New York Workers’ Compensation Board, sharing examples from actual claims and pointing to lower-cost alternatives. The experience offers four lessons for organizations looking to manage pharmacy costs while keeping appropriate treatment accessible.

1. Look Beyond Whether a Medication Is on the Formulary

Formulary status tells you whether a medication meets certain coverage requirements. It does not tell you whether the specific product being dispensed makes sense clinically or financially.

The same active ingredient may be available in several products with very different prices. That makes it important to look at the formulation, dosage, cost, and available alternatives, not just whether the medication appears on an approved list.

In one example CorVel shared with the Board, a form of lidocaine was billed at more than $3,000 for a one-month supply, even though lidocaine is also commonly available in much less expensive over-the-counter products.

A formulary is an important starting point, but it should not replace a closer look at what is actually being dispensed.

2. Ask Whether the Higher-Cost Option Adds Clinical Value

Price differences are easier to evaluate when two versions of the same medication serve a similar clinical purpose.

Diclofenac is one example. The medication is available in several forms, including topical preparations and tablets. In the cases CorVel identified, the issue involved diclofenac tablets, specifically the potassium and sodium formulations. CorVel saw requests for diclofenac potassium tablets submitted at several thousand dollars for a month’s supply, including one request exceeding $7,000. Diclofenac sodium tablets were significantly less expensive.

There may be a medical reason to choose one version for a particular patient. When there is, the documentation should explain why. The New York Workers’ Compensation Board has also indicated that payors may request a lower-cost, clinically equivalent formulation unless the prescriber provides a reasonable medical basis for preferring another option.

The question is not simply which medication costs less. It is whether the additional cost comes with a meaningful clinical benefit for that injured worker.

3. Look for Patterns Across Claims

One unusual prescription may not say much on its own. Repeated activity can tell a different story.

CorVel began seeing the same high-cost medications prescribed repeatedly, sometimes involving the same prescribers and independent pharmacies. More routine medications, meanwhile, were often being filled through the injured worker’s regular local pharmacy.

Looking across claims makes those patterns easier to spot. It can also help identify where closer review may be warranted, whether that involves a particular product, provider, pharmacy, or prescribing trend.

This broader view is especially useful when the cost issue is not tied to one medication, but to the way certain products are being prescribed and dispensed.

4. Bring Real Claims Experience Into the Regulatory Conversation

Some pharmacy issues cannot be solved one prescription at a time.

Over several years, CorVel shared examples of high-cost medications with the New York Workers’ Compensation Board, including actual claim information showing the amounts pharmacies were seeking in reimbursement. The team also recommended updates to the formulary and treatment guidelines and shared research on approaches other states had taken to address similar costs.

Over time, CorVel began seeing changes in some of the Board’s highest-level medication reviews.

In the diclofenac cases, the Board partially approved requests but authorized the lower-cost diclofenac sodium tablets when the documentation did not support a medical need for the more expensive diclofenac potassium tablets. In one decision, the Board stated that unless the prescriber provided a compelling clinical reason otherwise, authorization would apply to the least expensive form of the approved medication.

The injured worker still had access to diclofenac tablets. The difference was that using the substantially more expensive formulation now required a clearer clinical justification.

A More Complete View of Pharmacy Spend

Pharmacy costs are shaped by more than whether a medication is approved or denied. The specific formulation, available alternatives, prescribing behavior, and supporting medical documentation all matter.

New York’s experience shows what can happen when those details are examined together. Claims data can surface an issue, clinical expertise can help put it in context, and continued dialogue with regulators can help translate those findings into better review practices.

For employers, that means a better opportunity to control unnecessary pharmacy costs without creating barriers to appropriate care.