California Division of Workers’ Compensation Releases New MTUS Formulary Rules

Listening to Feedback

On Tuesday, July 18, 2017, the California Department of Workers’ Compensation (DWC) released the modified version of the MTUS- Formulary rules incorporating many of the comments and suggested changes submitted during the initial comment period.

The rules go on to add several requirements that a prescribing physician must satisfy if they are prescribing a Non-Exempt medication to an injured worker with a date of injury prior to January 1, 2018. For any injured worker falling into this pre-2018 category, the physician must submit a progress report and a Request for Authorization that addresses the ongoing drug treatment plan for the injured worker. That treatment plan must either:

  1. set forth a plan for the safe weaning, tapering, or
  2. transitioning of the Non-Exempt medication or it must provide documentation that supports and substantiates the medical necessity of the Non-Exempt medication.

This process must be complete no later than April 1, 2018.

Educating prescribers on this requirement and helping them to develop safe weaning plans will be challenging given the short timeframe. Payers should begin proactively identifying claims with Non-Exempt drugs to understand the scope of the issue in their book of claims.

Delayed IMPLEMENTATION and Other Notable changes

Other key modifications in the proposed rules include:

  • The effective date of the formulary has changed from July 1, 2017 to January 1, 2018.
  • The use of the nomenclature “Preferred/Non-Preferred” has been changed throughout the rules and replaced by the terms “Exempt/Non-Exempt” to better represent the selection of medication that are “exempt from the utilization review process.
  • The Non-Exempt drug list only changed slightly, as two antibiotics were changed from Non-preferred to Exempt and one injectable drug was deleted from the list.
  • Updated the definition of “compounded drug” to link it to definitions already found in the California Board of Pharmacy regulations and under federal compounding laws.
  • The preauthorization requirement was strengthened through the removal of the following language throughout multiple sections:

“If authorization through prospective review is not obtained prior to dispensing the drug, payment for the drug may be denied if it is determined upon retrospective review that the drug treatment was not medically necessary.”

The most material change to the rules is found in Section 9792.27.3(b) dealing with the Formulary Transition, which removes some of the ambiguous language and adds several paragraphs on how the transitioning of claims with Non-Exempt drugs should be done. The following language was removed:

“The claims administrator shall not unilaterally terminate or deny previously approved drug treatment. If the injured worker is receiving a course of treatment that includes a Non-Preferred Drug, an unlisted drug or a compounded drug, the existing procedures for submitting the treatment plan in accordance with MTUS regulations, and for obtaining authorization for the treatment in accordance with utilization review regulations, shall apply.”

Also hosted on the California MTUS webpage is a Notice and Summary of Changes as well as the Proposed MTUS drug list. Should your organization have any interest in discussing how these changes might impact your book of claims, PRIUM’s Litigation Support team would look forward to having that conversation.  Contact us here:  

Burgess v. Sewerage & Water Board of New Orleans

On June 29th, the Louisiana Supreme Court issued its decision in Burgess v. Sewerage & Water Board of New Orleans .  This landmark decision formally addresses the question of whether an injured worker has the right to select his or her own pharmacy (in the same way that an injured worker has the right to select a physician), or whether the payer may select a pharmacy to dispense medications in that claim.

The case also marks the second time that the Louisiana Supreme Court has ruled that medications are subject to the statutory $750-per-provider limit on non-emergency diagnostic testing or treatment in a workers’ compensation claim.

Additionally, the decision provides legal authority for payers to reduce or dispute bills from out-of-state providers (including out-of-state pharmacies).

A summary of the questions addressed in the decision is provided below; however, the decision in full may be obtained on the Court’s website here.


Questions Answered:

  1. Does an injured worker have the right to select his or her own pharmacy in a workers’ compensation claim?No. The Court held that “the employer has the right to choose the pharmacy to furnish necessary prescription drugs to an injured employee in a workers’ compensation case.”Prior to this decision, appellate courts had been split on the question – with the Second and Fourth Circuits allowing the injured worker to choose the pharmacy, while the Third and Fifth Circuits allowed the payer to select the pharmacy.
  2. Are pharmacies subject to the $750 per provider “mutual consent” requirement?Yes. This is the second time that the LA Supreme Court has ruled that medications are subject to the $750 requirement.  In June of 2016, the Court ruled in Lafayette  Bone  &  Joint  Clinic  v.  Louisiana United Business SIF that this limit could apply to medications dispensed by a physician.  Now, in the Burgess decision, they’ve made it clear that the requirement also applies to medications dispensed by a pharmacy.
  3. Can an out-of-state pharmacy be reimbursed for medications dispensed to injured workers in LA claims?The Court held that, to be considered a “permissible out-of-state provider,” the pharmacy must provide treatment that is either:            1.) not reasonably available within the state
                2.) provided at comparable costs (to those of an in-state provider)
  4. Is an out-of-state pharmacy subject to the LA reimbursement schedule? Additionally, the Court noted that even where the amounts billed are supported by the reimbursement schedule, they may still be deemed unreasonable, unnecessary, or not “usual and customary,” in which case, they will not be subject to compensation.


What to Expect:

Payers should develop a plan for dealing with bills from unauthorized pharmacies and for identifying an authorized pharmacy (if they have not already done so).  Payers should also develop a plan for dealing with bills for medications dispensed by a pharmacist or physician where that pharmacist or physician has already billed more than $750 for treatment in that claim.  Payers should also work with their vendors to ensure that bills from out-of-state pharmacies comply with the LA reimbursement schedule.

Should your organization have any interest in discussing how these changes might impact your book of claims, PRIUM’s Litigation Support team would look forward to having that conversation.  Contact us here: 

Regulatory Course Correction


On June 16, 2017, the Texas Department of Insurance, Division of Workers’ Compensation proposed a new rule which would require all compound drugs to be subject to the Closed Formulary’s preauthorization requirements.  The result of the proposed changes would be that all compounded medications, as opposed to exclusively those including an “N” ingredient, would require preauthorization. The proposed rule changes Rule §134.500(3)(B) are to read:

(3) Closed formulary–All available Food and Drug Administration (FDA) approved prescription and nonprescription drugs prescribed and dispensed for outpatient use, but excludes: 

(B) any prescription drug created through compounding any compound that contains a drug identified with a status of “N” in the current edition of the ODG Treatment in Workers’ Comp (ODG) / Appendix A, ODG Workers’ Compensation Drug Formulary, and any updates; and

The proposed rule also amends the language in Rule §134.530(3)(B) & Rule §§134.540(3)(B) to be consistent in the new definition of which compounds are included in the Formulary.

A copy of the Proposed Rules and the Notice of Rule Making have been made available to the public via the Texas Department of Insurance, Department of Workers’ Compensation website.

Why the rule change?

Since the full adoption of the Closed Formulary in 2013, Texas has seen a dramatic decrease in drug costs and utilization. According to the Texas Department of Workers’ Compensation since the implementation of the formulary:

  • Total drug costs fell 15%.
  • Costs for drugs that are not recommended, so called N drugs, fell by 80%.
  • Prescriptions for opioids on the N-drug list dropped 81%, and the use of other opioids fell by 8%.

However, during that same period, one class of drugs, Compound Drugs, has increased significantly in both cost and utilization.

What Happened?

The reasoning for why overall drug spend and utilization decreased, while spend and utilization for compounding increased is likely due to the original language of the Closed Formulary itself.  Rule §134.500(3)(B) defines which drugs are subject to the formulary:

All available Food and Drug Administration (FDA) approved prescription and nonprescription drugs prescribed and dispensed for outpatient use, but excludes: … any compound that contains a drug identified with a status of “N” in the current edition of the ODG Treatment in Workers’ Comp (ODG) / Appendix A, ODG Workers’ Compensation Drug Formulary…

Under this definition, only compound drugs that contain an ingredient categorized as “N” is subject to preauthorization.

Prior to the implementation of the formulary, only about 38% of compunded medications contained one or more “N” drugs.  As you might expect the result of the passing of the closed formulary lead to further reliance on this loophole circumventing preauthorization.  In 2016 only 10% of compounded medications contained an “N” drug and thus subject to preauthorization requirements, while generally utilization of compounded medications and the cost per fill both increased.

According to a May 2017  report by the Texas Department of Insurance, Workers’ Compensation Research and Evaluation Group: 

  • The number of compounded drugs increased from 18,020 prescriptions in 2010 (1.6 percent of total pharmacy prescriptions) to 26,380 in 2014 (3.2 percent of total). Since 2014, it decreased steadily to 20,751 in 2016 while their share of the total pharmacy prescriptions remained at 3.2 percent.
  • In 2010, the total cost of compounded drugs was $6 million (4 percent of the total pharmacy cost of $152 million), which increased to $12 million in 2014 (12.5 percent of the total $112 million). In 2016, the total cost decreased to $11 million (11 percent of the total $98 million).
  • The average cost of compounded drug prescription was $356 in 2010, which increased to $829 in 2016 (a 133 percent increase).


What to Expect

Payers should look for these rule changes to be finalized within the next 60 days and should think about preparing their book of business for the differing requirements that compound medications will have for preauthorization.  Should your organization have any interest in discussing how these changes might impact your book of claims, PRIUM’s Litigation Support team would look forward to having that conversation.  Contact us here: 

The world apparently needs more opioids, so the FDA approved another one yesterday.  Egalet Corporation’s long-acting morphine formulation, Arymo ER, will hit the market here in the US before the close of Q1.  Interesting side note for those interested in the economic value of abuse-deterrence: Egalet stock initially shot up 27% on the approval news.  But when it became clear the Arymo label would only include abuse-deterrence language for dissolution and injection, but not for snorting or chewing it (because another abuse-deterrent opioid has rights to exclusivity for the particular claim), the stock dropped 16% yesterday and another 20% this morning.  By my calculations, that drop erased about $70 million in equity value.  And according to Yahoo Finance, 58% of the share are held by “insiders” (aka company executives) and one officer, Egalet CEO Robert Radie, holds nearly 50% of those insider shares.  So he’s $20 million poorer this morning because he can’t claim his new drug cannot be snorted or chewed.  If the mix of healthcare and high finance is a little nauseating to you, you’re not alone.

In other pain management news, there’s a really interesting study in this month’s Journal of Pain Research regarding the relationship between “pain acceptance” and outcomes measures such as disability, mental health, and quality of life.  The study also relates this concept of “pain acceptance” to behaviors such as “pain catastrophizing,” a phenomenon wherein a person “experiences exaggerated worrying and overestimation of the probability of unpleasant outcomes in response to pain.” Notably, the study looks exclusively at a workers’ compensation population.

Not surprisingly, higher “pain acceptance” scores were strongly correlated with less disability and greater mental and physical health.  “Pain catastrophizing” appeared to have the opposite effect – increased disability and poorer perceived health.  If you’re wondering why you’re hearing so much these days about cognitive behavioral therapy, this is why.

The study caused me to contemplate the broader picture of where we stand on the issues of chronic pain and opioid use.  We get lost in the statistics sometimes and fail to see the forest for the trees. Here’s the real bottom line: the last quarter century has seen both an explosion in chronic pain and an explosion in opioid use.  The latter does not appear to be mitigating the former.  At all.

From another (highly clinical/technical) study that also crossed my desk last week from the Department of Palliative Care at Geisinger Medical Center, I drew this important insight: “Do not use pain intensity as the primary outcome in the management of chronic pain.”  Sounds pretty simple.  But do we use, then?  Perhaps a greater focus on concepts like “pain acceptance” will help us break through the chronic pain conundrum.

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