How Will California’s Formulary for Medication Impact California Claims?
Effective January 1, 2018, the Administrative Director of California adopted 23 new regulations, California Code of Regulations numbers 9792.27.1 through 9792.27.23, for the purpose of creating a “formulary for medication.” In the Administrative Director’s statement regarding the adoption of the formulary, the national and statewide issue of deaths related to the use of opioid medications was cited, as was the goal of providing “safer prescribing” of opioid pain relievers. The Administrative Director also cited the more general goal of “broadly updating” the Medical Treatment Utilization Schedule to allow patients to receive treatment which is “in accordance with the most recent standards of evidence-based care.”
Since nearly every worker’s compensation case involves the provision of medication, the adoption of a “formulary” to address that care has the potential to impact nearly every case, in large or small ways. So how does the formulary change the way medication is provided in the Worker’s Compensation system?
Prior to the adoption of the formulary, all requests for medication were considered equal. Each one would be requested through a Request for Approval by the applicant’s treating physician (PTP), which would then either be approved or denied through Utilization Review (UR) in a procedure called a “prospective review” as it would occur prior to the medication being provide or it could always just be approved by the adjuster without UR. If Utilization Review approved the care, the care would be provided, and if UR denied the care, the applicant would have the opportunity to appeal that decision to Independent Medical Review (IMR). At that stage, if IMR approved the care, the defendant would be required to either approve or reimburse incurred costs for the care, or if IMR denied care, the denial would be considered final for 1 year, absent a change in circumstances.
Under the formulary, medications are broken into three classes, and “Prospective Review” of RFAs only applies to two of the three classes. The three classes of medication are Exempt, Non-Exempt and Unlisted medications. Non-Exempt and Unlisted medications are usually treated the same way they were prior to the adoption of the formulary. Exempt medications are treated differently. Exempt medications can be provided by a pharmacy without a prior Request for Authority and without going through the UR process. This does not mean the bill for all exempt medications must be paid or that no RFA is necessary, on the contrary, the PTP is still expected to provide an RFA, and if UR denies this Request for Authority through a Retrospective Utilization Review (so called because it is performed on a retrospective basis on medication already provided), the bill does not need to be paid.
The result of this uncertainty regarding whether bills will be paid may lead to many doctors issuing RFAs before providing medication, or pharmacies not providing medication until a guarantee of payment is issued, even for exempt medications. It has also lead to some difficulty with pharmaceutical benefits management companies who generally only have the capacity to either “approve” (which includes a promise of payment) or “disapprove” medication requests. Additional nuance in the communication whether a specific medication prescription is approved, denied or should be provided without the requirement of an approval, but with the issue of payment unresolved may be required.
The biggest single gain for defendants is likely the fact that both compound medications and the provision of “brand name” medication when a generic alternative exists are both specifically disfavored and must be justified in detail in an RFA by a PTP. Both of these provisions could lead to a significant cost savings.
In summary, while the stated goal of the adoption of the formulary was to curb the provision of opioid medication, the legal effect of the formulary is to do so by making other medications exempt from UR. Opioid medication is not banned, it is merely “not exempt,” meaning that it still needs to go through the RFA process, the same process it had been subject to previously. Whether incurring the headache of dealing with “exempt” medications and a new approval process will pay off in terms of less requests for expensive and addictive opioids, and more UR and IMR denials of expensive and addictive opioids remains to be seen.