The National Council on Compensation Insurance (NCCI) found that in two states that adopted the Official Disability Guidelines Workers’ Compensation Drug Formulary, prescription drug utilization decreased across all categories. Researchers looked at the closed drug formulary adopted in Arizona and Tennessee.

They found that prescription drug utilization decreased across all categories, regardless of whether they required prior authorization. N-drugs, which require prior authorization, declined at a rate of 7 to 14% beyond the utilization decreases observed in relative benchmarks. Changes in N-drug utilization were driven by a decrease in the share of active claims receiving at least one N-drug in Tennessee, and Arizona experienced a decrease in N-drug scripts per claim with an N-drug. Decreasing utilization offset rising prices for N-drugs, which resulted in a decrease in N-drug costs per claim and a decreased share of prescription drug costs attributable to N-drugs. There was little evidence that physician services (ex. physical medicine) were substituted for prescription drugs because of this formulary.

Utilization of topical and compound drugs in Tennessee decreased significantly after the formulary was implemented. While 80% of opioid scripts before implementation already involved Y-drugs, the formulary had a limited impact on opioid utilization in the early period after implementation.

Prescription drug payments make up 14% of ultimate total medical costs for Accident Year 2016 in workers’ comp, and closed drug formularies have started to gain traction as a pharmacy utilization management tool. Closed formularies do not allow reimbursement for N-drugs without prior payer authorization.

Tennessee adopted the formulary and applied it to newly written prescriptions dispensed after August 28, 2016, then all new prescriptions after February 28, 2017. In Arizona the formulary was applied to prescriptions after October 1, 2016. Prior to adoption Arizona spent 34% of their total share of prescription drug payments on N-drugs and they comprised 19% of total scripts, while those figures in Tennessee were 31% and 18%, respectively. Similar states saw 34% of prescription spend go to N-drugs and 19% of the share of total scripts were for N-drugs.

After the formulary Tennessee saw the rate of change in N-drug utilization drop by 23.2%, and in Arizona it was 19% while in similar states to Tennessee the rate was 10.3% and 12.6% for similar states to Arizona.

Check out the full brief from NCCI here.