Texas Closed Formulary has Reduced System Drug Costs

The Texas closed formulary has dramatically lowered the use of drugs considered inappropriate to treat workers compensation claimants. The results have been complied in a February 2015 study of the closed formulary conducted by the Texas Research and Evaluation Group.

The closed formulary excludes a list of N-drugs derived from the formulary contained in the Official Disability Guidelines published by the Encinitas, Calif.-based Work Loss Data Institute. The list of N-drugs include more than 25 brands of opioid pain relievers, several muscle relaxants, antidepressants and cannabinoids.

Under the formulary, the prescription of N-drugs excluded from the formulary requires preauthorization by insurers or self-insured employers. Without preauthorization, insurers and self-insured employers can deny payment to medical providers who prescribe such drugs or pharmacies that dispense them.

The formulary was implemented in two phases.

On September 1, 2011, the formulary took effect for injuries occurring on or after that date. Phase two took effect and then on September 1, 2013 for legacy claims. Waiting two years to apply the closed formulary to the legacy claims was designed to give doctors and their patients accustomed to taking N-drugs time to adjust their treatment after seeing how the process worked for new injury cases.

The first phase of the closed formulary cut N-drug prescribing by 65% among newer claims. The total spent on N-drugs for those claims dropped 83% to less than $800,000 in 2011 from $4.4 million in 2010.

Phase two of the closed formulary produced similar, if somewhat less dramatic results. The average pharmacy cost per legacy claim dropped by 18 percent in the first month they became subject to the pharmacy closed formulary (September 2013). The total cost of N-drugs decreased from $1.42 million in August 2013 to $607,000 in September 2013 (a 57 percent decrease), and decreased to $290,000 in September 2014.