Pharmacy Cost and Utilization Trends in Texas: Ten Years After Implementing the ODG Drug Formulary
November 30, 2023 | Categories: ODG by MCG
A recent study published by the Texas Department of Insurance’s Workers’ Compensation Research & Evaluation Group (REG) shows that pharmaceutical costs and utilization among injured workers continue to trend down in Texas, more than a decade after the state adopted ODG by MCG’s evidence-based closed drug formulary.1
The ODG Drug Formulary lists more than 350 medications and includes more than 50,000 NDC codes for drugs commonly used to treat injured workers. In an easy-to-use format, ODG assigns a “Y” status for drugs recommended as first-line treatment based on current medical studies, and an “N” status for drugs which may be appropriate as second-line treatment subject to additional utilization review.2
Texas became the first state to formally adopt the ODG Drug Formulary in 2011, four years after implementing ODG’s evidence-based medical treatment guidelines pursuant to systemic reforms. Six more state workers’ compensation systems have followed suit since then, including Oklahoma, Arizona, Tennessee, Indiana, Kentucky, and Montana. The REG results of post-formulary trends in pharmaceutical costs and utilization are dramatic testimony to the positive impact of well-designed and properly implemented evidence-based closed drug formularies.
The State Legislature authorized the adoption of an evidence-based closed drug formulary for Texas in 2005 via HB7. Working with stakeholders and ODG, four years after adopting ODG treatment guidelines, the Division of Workers’ Compensation formally adopted the ODG Drug Formulary published as Appendix A to the existing treatment guidelines. The formulary is implemented in Title 28 of the Texas Administrative Code, beginning with Rule 134.500, which defines closed formulary to mean “all available Food and Drug Administration (FDA) approved prescription and nonprescription drugs prescribed and dispensed for outpatient use.” The definition expressly excludes:
- Drugs identified as an “N-Drug” in the ODG Drug Formulary
- Compounds prescribed before July 1, 2018, containing an “N-Drug”
- Compounds prescribed and dispensed on or after July 1, 2018
- Investigational or experimental drugs for which there is early, developing scientific or clinical evidence demonstrating potential efficacy, but which are not yet broadly accepted as the prevailing standard of care as defined in Labor Code §413.014(a)
Per the legislative mandate, subsequent rules provide that drugs falling within each of those exceptions may be approved but require preauthorization via a process detailed in the regulations.
The current REG study analyzes trends in pharmacy costs and utilization before and after the formulary, based on administrative data reported by insurance carriers as of June 2023. Uniformly, the numbers reflect positive changes over the study period. Total pharmaceutical costs decreased 73%, from almost $165 million in 2009 to less than $45,000,000 in 2022. The decrease was driven by a 73% decrease in the total number of prescriptions written for injured workers. Conversely, due to rules favoring generics over brand medications with similar efficacy, generic prescriptions rose 21%, from 74% of all prescriptions in 2009 to 95% in 2022. The average pharmaceutical cost per claim decreased 39%, from $1,022 in 2009 to $626 in 2022. Cost reductions were more pronounced in lost-time claims compared to medical-only claims.
At the time of the formulary adoption, the national opioid crisis was shifting into high gear. Significantly, the REG found that total number of opioid prescriptions decreased 86% from 2009 to 2022, from 555,000 to 78,000. Over the same period, prescriptions for opioids identified as “N-Drugs” – i.e., those less proven, higher-risk drugs recommended for additional utilization review – decreased by 96%, from 48,000 to just 2,000.
The Texas REG study is welcome but not unexpected news for proponents of evidence-based drug formularies in the workers’ compensation system. Formularies are scientific, but the concept is not “rocket science”. At its core, the ODG Drug Formulary adopted by Texas and other states sits atop the treatment guidelines as an application tool, listing drugs commonly used to treat work injuries. Based on the best, most current medical studies, it identifies those proven to be effective and low risk versus those that are more questionable or in some cases, even harmful. While both remain subject to utilization review against criteria in the guidelines, the latter receives extra scrutiny with a requirement for prior authorization. The goal is to help providers segregate good care from bad. Properly implemented, it should be no surprise that the formulary shifts prescribing patterns towards better medicine that leads to better outcomes for injured workers, their employers, and the workers’ compensation system.
– Patrick F. Robinson, JD, MBA, ODG by MCG Vice President of Government Affairs. Published on November 29, 2023.
The information contained in this article concerns the ODG guidelines (or solutions) as of the date of publication, and may not reflect revisions made to the guidelines (or solutions) or any other developments in the subject matter after the publication date of the article.
References:
- Texas Department of Insurance, Division of Workers’ Compensation (2023, September 29). Pharmacy Cost and Utilization in the Texas Workers’ Compensation System. Texas Department of Insurance Division of Workers’ Compensation (DWC). Retrieved November 29, 2023, from https://www.tdi.texas.gov/reports/wcreg/documents/pharmacy2023.pdf
- ODG by MCG (n.d.). ODG Drug Formulary Derived From Evidence-based Treatment. https://www.mcg.com/odg/workers-comp-guidelines/workers-compensation-solutions/drug-formulary/
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