BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1124|
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THIRD READING
Bill No: AB 1124
Author: Perea (D)
Amended: 9/4/15 in Senate
Vote: 21
SENATE LABOR & IND. REL. COMMITTEE: 4-1, 7/13/15
AYES: Mendoza, Stone, Jackson, Mitchell
NOES: Leno
SENATE APPROPRIATIONS COMMITTEE: 5-1, 8/27/15
AYES: Lara, Beall, Hill, Leyva, Mendoza
NOES: Bates
NO VOTE RECORDED: Nielsen
ASSEMBLY FLOOR: 79-0, 6/3/15 - See last page for vote
SUBJECT: Workers compensation: prescription medication
formulary
SOURCE: Author
DIGEST: This bill requires that the Division of Workers
Compensation (DWC) create a workers compensation-specific
formulary that governs the prescribing of medicines for injured
workers.
Senate Floor Amendments of 9/4/15 provide a process for updating
the workers' compensation formulary, clarify the intent of the
Legislature, and make technical and explicatory revisions.
ANALYSIS:
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Existing law:
1)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.
2)Provides that medical, surgical, chiropractic, acupuncture,
and hospital treatment, including nursing, medicines, medical
and surgical supplies, crutches, and 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)
3)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)
4)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)
5)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)
6)Sets, currently, 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
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Medical Fee Schedule (OMFS). (Labor Code §5307.1)
7)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:
1) Requires the Administrative Director (AD) establishes a
formulary for medications prescribed in the workers'
compensation system to be effective commencing July 1, 2017.
The formulary must allow for variances if a preponderance of
evidence suggests such a variance is medically necessary.
2) Allows the formulary to include a phased implementation for
workers injured on or after July 1, 2017 to allow those
workers to safely transition to medications on the formulary.
3) Requires the DWC to meet and consult with workers'
compensation stakeholders prior to the establishment of a
formulary. The stakeholders include, but are not limited to,
employers, insurers, private sector employee representatives,
public sector employee representatives, treating physicians
actively practicing medicine, pharmacists, pharmacy benefit
managers, attorneys who represent applicants, and injured
workers.
4) Creates an independent Pharmacy & Therapeutics (P&T)
Committee to review and consult with the AD on available
evidence of the relative safety, efficacy, and effectiveness
of drugs or a class of drugs in updating to the formulary.
5) Requires that the P&T Committee consist of six members and
the Executive Medical Director of the Division of Workers'
Compensation (DWC). All members must either be a medical
doctor, as defined, or a pharmacist, as defined.
6) Requires that the members of the P&T Committee be experts in
one of the following areas:
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a) Clinically appropriate prescribing of covered drugs;
b) Clinically appropriate dispensing and monitoring of
covered drugs;
c) Drug use review; or
d) Evidence-based medicine.
7) Requires the creation of a conflict of interest code for P&T
Committee members and requires that committee members keep
all proprietary information confidential.
8) Requires that the formulary be updated at least quarterly,
and provides an exemption from the APA process for changes to
the formulary drug list.
9) Requires the DWC to publish at least two interim reports on
the status of the establishment of the formulary.
10)Requires that the dispensing of non-generic medicines and
medicines provided pursuant to a contract with a Pharmacy
Benefit Manager be subject to the formulary.
11)Declares the intent of the Legislature that the creation of
the formulary be transparent, provide guidance on off-label
dispensing, generic drugs, and pain management, as well as
guidance on the use of the formulary to minimize
administrative burdens and costs.
Comments
1)What is a Formulary?
A formulary is generally defined in 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
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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
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.
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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
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
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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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee:
1)DIR estimates that, under the August 17th version of the bill,
it would incur annual costs in the range of $1 million to $1.1
million (special funds) to implement its provisions. As
amended, the bill would likely have a similar fiscal impact.
2)These costs would likely be ultimately offset by savings in
the workers' compensation system. The extent of the savings is
unknown, but one report indicates that related payments could
be reduced in the range of $124 million to $420 million
annually. While most of these savings would be realized by the
private market, the State (as an employer) would achieve an
unknown portion.
SUPPORT: (Verified9/8/15)
American Insurance Association
Association of California Insurance Companies
California Chamber of Commerce
California Coalition on Workers' Compensation
California Labor Federation
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California Manufacturers and Technology Association
Comp Pharma
Helios
Pacific Insurance
Small Business California
Zenith Insurance
OPPOSITION: (Verified9/8/15)
Californian Applicants' Attorney Association
ARGUMENTS IN SUPPORT: 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.
ARGUMENTS IN OPPOSITION: 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.
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ASSEMBLY FLOOR: 79-0, 6/3/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,
Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez,
Salas, Santiago, Steinorth, Mark Stone, Ting, Wagner, Waldron,
Weber, Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Thurmond
Prepared by:Gideon L. Baum / L. & I.R. / (916) 651-1556
9/8/15 15:43:54
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