BILL ANALYSIS Ó
SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
Senator Tony Mendoza, Chair
2015 - 2016 Regular
Bill No: AB 1124 Hearing Date: July 13,
2015
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|Author: |Perea |
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|Version: |June 1, 2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Gideon Baum |
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Subject: Workers' compensation: prescription medication
formulary
KEY ISSUE
Should the Legislature require that the Division of Workers'
Compensation (DWC), after receiving recommendations from a
Workers' Compensation Formulary Advisory Committee, create a
workers' compensation-specific formulary that would govern the
prescribing of medicines for injured workers?
ANALYSIS
Existing law establishes a workers' compensation system that
provides benefits to an employee who suffers from an injury or
illness that arises out of and in the course of employment,
irrespective of fault. This system requires all employers to
secure payment of benefits by either securing the consent of the
Department of Industrial Relations (DIR) to self-insure or by
securing insurance against liability from an insurance company
duly authorized by the state.
Existing law provides that medical, surgical, chiropractic,
acupuncture, and hospital treatment, including nursing,
medicines, medical and surgical supplies, crutches, and
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apparatuses, including orthotic and prosthetic devices and
services, that is reasonably required to cure or relieve the
injured worker from the effects of his or her injury shall be
provided by the employer.
(Labor Code §4600)
Existing law requires that pharmacists and prescribing
physicians must dispense generic drug equivalent, unless a
generic drug equivalent is unavailable or the prescribing
physician documents specifically why a non-generic drug should
be dispensed. (Labor Code §4600.1)
Existing law provides that employers, insurers, or groups of
employers or insurers may contract with a pharmacy, group of
pharmacies, or pharmacy benefit network to provide medicines and
medical supplies to injured workers. Such a contract must comply
with the standards set by the Administrative Director, who is
the head of the Division of Workers' Compensation (DWC).
(Labor Code §4600.2)
Existing law requires that all employers create a utilization
review process, which is a process that prospectively,
retrospectively, or concurrently review and approve, modify,
delay, or deny, based in whole or in part on medical necessity
to cure and relieve, treatment recommendations by physicians,
prior to, retrospectively, or concurrent with the provision of
medical treatment services. (Labor Code §4610)
Existing law currently sets the maximum reimbursement for
pharmacy drugs and services, and also requires that furnishing
and dispensing of pharmacy drugs and services are subject to the
Official Medical Fee Schedule (OMFS). (Labor Code §5307.1)
Existing law provides that the Administrative Director must
adopt, after public hearings, a medical treatment utilization
schedule, that shall incorporate the evidence-based,
peer-reviewed, nationally recognized standards of care and must
address, at a minimum, the frequency, duration, intensity, and
appropriateness of all treatment procedures and modalities
commonly performed in workers' compensation cases. (Labor Code
§5307.27)
This bill requires the Administrative Director (AD) establishes
a formulary for medications prescribed in the workers'
compensation system to be effective commencing July 1, 2017.
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This bill requires the AD convenes a Workers' Compensation
Formulary Advisory Committee to assist in the development of the
formulary. The Committee must include, but is not limited to,
health care providers, insurers, employers, pharmacists,
applicant attorneys, an appointee from the Speaker of the
Assembly and appointee from the Senate Rules Committee.
This bill also requires that the Formulary Advisory Committee
study and make recommendations on the development of a workers'
compensation formulary, and that they meet quarterly and provide
their recommendations by December 31, 2016.
This bill also requires that the Formulary Advisory Committee
make recommendations on the need for evidence-based revisions to
the formulary. The Administrative Director would then have 60
days to approve or reject the recommended revisions.
This bill requires that the formulary include the following:
1) Injured worker access to appropriate opioids, other pain
management prescriptions, and off-label prescription drugs,
when medically necessary;
2) A gradual detoxification plan for a worker receiving
potentially addictive prescription drug treatment; and
3) Timely formulary updates that minimize delays involved
in adding new drugs to the formulary.
4) Injured worker access to a non-formulary medication when
the only formulary medication available for a worker's
covered condition is one that the worker cannot tolerate,
or that is not clinically efficacious for the worker, or
provider determines medication needed by worker should
include abuse deterrent properties. Exceptions to formulary
medications as noted in this section shall not be required
absent a trial period and issuance of a medical finding by
the injured worker's provider outlining the medical basis
for the conclusion that the worker cannot tolerate the
formulary medication.
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COMMENTS
1. What is a Formulary?
A formulary is generally defined in the medical literature as
a list of medications and related policies which is
continually updated by experts, such as pharmacists and
medical providers, and represents the most up-to-date
knowledge of medical treatment and appropriate use of
pharmaceutical products. Formularies are the norm in medical
care delivery systems: Medicare and Medi-Cal have formularies,
as do group health providers and single-payer healthcare
systems internationally.
Formularies are used to place limits on the use of medications
in order to avoid over-use, ensure that the use of medication
matches the latest in medical literature, and promote optimal
outcomes. Equally important, formularies allow medical
providers and pharmacists to know what medicines will and will
not be paid for, and for what conditions medicines are
allowed, reducing friction and making it easy to provide
medical services. Formularies, therefore, hold the promise of
both improving healthcare outcomes and reducing burdens for
medical providers to provide care.
California, however, does not have a formulary for its
workers' compensation system. Not surprisingly, therefore,
pharmaceuticals are significant point of friction in workers'
compensation. For example, nearly half of all (42%)
Independent Medical Review (IMR) medical disputes involve
pharmaceuticals, dwarfing all other categories. These disputes
delay medical treatment for injured workers, and are also
time-consuming and expensive for both medical providers and
payors.
Additionally, there are concerns with how pharmaceuticals are
being utilized in the workers' compensation system. For
example, between 2002 and 2013, the California Workers'
Compensation Institute (CWCI) found that the prescribing of
Schedule II Drugs, which include oxycontin, fentanyl and
morphine, have grown to 7.3 percent of California workers'
compensation prescriptions and 19.6 percent of California
workers' compensation prescription dollars - a nearly 600% and
400% growth, respectively. As Schedule II pharmaceuticals like
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fentanyl can be more powerful than heroin, this growth is
somewhat worrying for the long-term outcomes of California's
injured workers, and raises concerns of dependence-causing
drugs being improperly prescribed.
As was noted above, a formulary has the potential to solve
both issues. First, a formulary provides a list of
pharmaceutical products and when they can be used. This
ensures that medicines are prescribed for medical, and not
financial, purposes, and it ensures that the medicines are
appropriately used. Second, when a medical provider utilizes
the formulary, the payor knows why a particular medicine was
used and why. This cuts down on medical disputes, ensuring
that medical providers are paid and injured workers get the
medicines they need.
2. Formularies in Texas and Washington:
Recent interest in a formulary for California's workers'
compensation system intensified after a 2014 study by the
California Workers Compensation Institute (CWCI), which
projected savings between $124 to $420 million from California
adopting a formulary similar to Texas or Washington. Both
Texas and Washington adopted formularies in response to
sustained, double-digit growth in their workers' compensation
prescription drug costs, and experienced significant declines
in the use of opioids. However, both states have very
different formularies.
Washington first launched its formulary in 2004 as a part of a
larger initiative to control drug purchasing costs across
state agencies. At its core, Washington has a short list of
preferred drugs that can be prescribed or dispensed by a
medical provider. If a medical provider wishes to prescribe
something that is not on the list, he or she needs to seek
prior authorization from the State of Washington. However,
Washington also allows for physicians to write non-preferred
drug class prescriptions if the physician has signed up to
allow for drug substitution when medically appropriate.
Washington updates and maintains its formulary through the
Pharmacy and Therapeutics Committee, which is composed
entirely of physicians and pharmacists. The Committee looks at
the safety, efficacy, and effectiveness of each drug and then
makes a recommendation to the State of Washington. Public
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comment is also possible for interested stakeholders.
Texas, on the other hand, implemented its formulary in 2011.
After looking at several formularies in other states, Texas
decided to include all FDA approved drugs in its formulary.
However, the guidelines for prescribing drugs were developed
by Official Disability Guidelines (ODG), a private company
that also developed Texas's medical treatment guidelines.
ODG's drug guidelines classify each drug with either an 'N' or
'Y', with 'N' drugs requiring prior authorization. Updates to
the formulary are automatically performed by ODG.
While both states developed very different formularies, they
share several common traits. First, the legislatures in both
states delegated the creation of the formulary to their
respective workers' compensation administrative entities.
Second, the final decisions for what drugs are pre-approved or
not are decided by committees made up of pharmacists and
medical providers. Third, the enacting statutes were largely
conceptual and left the specifics to the regulatory process.
3. AB 1124 and the Workers' Compensation Formulary Advisory
Committee:
Under the existing law, the Administrative Director has the
authority to create a formulary. However, this authority has
not been tested by the courts, and the AD has yet to
promulgate a formulary. AB 1124 would require that the
Administrative Director do so by January 1, 2017.
However, AB 1124 differs from both Washington and Texas by
creating the Workers' Compensation Formulary Advisory
Committee (Advisory Committee), which would make
recommendations to the AD on both the creation and maintenance
of the formulary. The Advisory Committee would consist of both
medical professionals and non-medical stakeholders. This may
create implementation challenges, which will be discussed
below.
a) Advisory Committee Governance and Structure
As was discussed above, the Advisory Committee is created by AB
1124 and tasked with the creation and maintenance of a
formulary. Essentially, the Advisory Committee functions as an
additional public forum prior to the creation of a formulary
through the regulatory process. In performing its function, the
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Advisory Committee would be required to comply with Bagley-Keene
Act and the California Public Records Act, the cost of which
would likely come from DIR's budget.
However, it is unclear how the Advisory Committee would
function. Would there be a Chairperson? Would questions be
decided by a majority vote? What are the terms of the members?
Would each stakeholder be represented by a single individual?
Why are there no employee representatives? Currently, these
questions are unanswered.
The Committee may wish to consider if it would be more efficient
to mandate a stakeholder outreach process by DIR and DWC in the
creation of a formulary, rather than the Advisory Committee.
Such a process could cost less, entail fewer litigation risks,
and may be more likely to yield expert opinions that would more
effectively shape the regulatory process.
b) The Inclusion of Non-Medical Stakeholders in the
Advisory Committee
As was noted above, AB 1124 currently requires that the Advisory
Committee be composed of multiple stakeholders including, but
not limited to, insurers, employers, applicant attorneys,
legislative leadership appointees, as well as medical providers
and pharmacists. If the Advisory Committee functioned on a
majority vote basis, it is possible that non-medical
stakeholders could outvote the medical expertise provided by
medical providers and pharmacists. The Committee may wish to
consider how non-medical stakeholders could impact the creation
of an objective medical guideline for the treatment of injured
workers.
4. AB 1124 and Workers Compensation Administration:
As was noted earlier in the analysis, the promise of a
formulary is that it will reduce medical disputes, improving
payments for medical providers and reducing frictional costs
for employers. However, AB 1124 may face challenges in
fulfilling such a promise. Specifically, this is due to the
bill's silence on the existing Utilization Review (UR)
process, as well as the inclusion of language listing
exemptions from the formulary.
Utilization Review and AB 1124:
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Under current law, a request for authorization (RFA) for
medication would be submitted to the employer by a medical
provider. If the employer contested the use of the medication,
he or she would then submit the request for UR. However,
different employers submit different treatment requests to UR:
medication that may be automatically approved by one employer
would be disputed by another. Additionally, medical providers
prescribe different drugs for the same condition: where one
medical provider would prescribe ibuprofen, another may
prescribe opioids. This lack of common guidelines leads to
disputes that hurt both medical providers and employers.
A formulary helps to rectify this by providing common
guidelines for both sides to follow, but also modifying the
dispute process. For example, if a medical provider is
following the formulary in Texas, her treatment will not be
disputed. Moreover, if an employer has concerns and wishes to
dispute the use of a drug, it can only be done
retrospectively, ensuring the injured worker receives his or
her medication.
AB 1124 retains the current UR process, making the formulary a
useful reference, but not a legally binding mechanism to
reduce disputes. Without such a mechanism, it is unclear if
the formulary will result in the cost savings for employers
and medical providers, or improved outcomes for injured
workers.
Formulary Exceptions and AB 1124:
As currently written, AB 1124 provides for exceptions to the
formulary if the injured worker cannot tolerate the
medication, if the medication is not clinically efficacious,
or if the provider determines that tamper-resistance
medication is necessary. While AB 1124 requires a trial period
and a medical finding for such a determination, it is unclear
how such an exception would operate. For example, if a
treatment was found to be ineffective, but another treatment
on the formulary was effective, would the effective formulary
treatment be required? Or would the medical provider still
have the ability to deviate from the formulary? Would the
employer utilize UR? Or would the physician be presumed
correct, and therefore the dispute would need to be litigated
through the WCAB?
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HOWEVER, the author's office has reported that amendments
taken in Committee will address these concerns.
5. Proponent Arguments :
Proponents note that California has some of the highest
workers' compensation costs in the country and argue that much
of this is due to frictional costs related to the prescribing
of prescription drugs. Proponents note the recent CWCI study
which projects significant savings in the creation of a
formulary, and argue that such savings could bring relief to
employers and reduce burdens on medical providers. Proponents
believe that AB 1124 would create an evidence-based formulary
that would ensure that injured workers receive the drugs they
need, reduce disputes, speed up treatment, and combat the
inappropriate prescribing of opioids and other dangerous
drugs.
6. Opponent Arguments :
The California Applicants' Attorneys Association (CAAA) is
opposed unless amended to AB 1124. Specifically, CAAA argues
that AB 1124 should include a provision that limits the use of
utilization review of drugs on the formulary. CAAA argues
that, to the degree that a drug formulary will reduce access
to certain prescriptions and limit employee medical treatment
options, it is only reasonable that the employee should not be
subject to unnecessary delays in approving prescription
treatments. As such, CAAA urges that AB 1124 be amended to
include limits on the use of utilization review when an
injured worker is prescribed a drug from the approved
formulary by a medical provider network doctor.
7. Prior Legislation :
AB 378 (Solorio), Chapter 545, Statutes of 2011, regulates the
reimbursement rates for compound drugs and certain types of
prescription drugs.
SUPPORT
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Association of California Insurance Companies
Zenith Insurance
OPPOSITION
California Association of Joint Powers Authorities
Californian Applicants' Attorney Association
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