A Healthesystems publication

Spring 2014

State of the States



After monitoring the positive impact of Texas’ closed formulary, Oklahoma adopted its own with some differences.

The Oklahoma formulary is effective for claims arising on or after February 1, 2014, so there will be no legacy claims to transition into the requirements.

While there are similarities between the two states’ closed formularies, the Oklahoma exclusions are broader than Texas’. Both Texas and Oklahoma exclude any drug in the Official Disability Guidelines “N” Drug List and all experimental and investigational drugs. The Oklahoma formulary excludes all compounds, while the Texas formulary only excludes those that contain “N” drugs. In addition, the Oklahoma formulary excludes all drugs that are not preferred, exceed or are not addressed by the ODG in effect on the date of treatment. Any drug not included in the formulary requires preauthorization.

Once a provider makes a preauthorization request, the carrier or employer must respond within 72 hours or the preauthorization request is granted. If the provider prescribes a drug that requires a preauthorization request but failed to obtain preauthorization, the payer may deny payment for that drug.

Changes and challenges might be lodged with the implementation as the number of claims affected by the closed formulary increases because it was developed using an abbreviated timeframe, giving stakeholders less time to provide feedback.


The Ohio Bureau of Workers’ Compensation adopted revisions to the rule, Payment for Outpatient Medications by Self-Insuring Employer, OAC 4123-6-21.1, effective December 1, 2013. The revisions establish a payment methodology limiting reimbursement for non-sterile compounded prescriptions. Previously, the reimbursement formula for pharmacy providers included both a product cost component and a dispensing fee component. The rule change adds two elements to the product cost component for compound drugs. First, the product cost component for non-sterile compounded prescriptions is now limited to the lesser of the usual and customary price or the average wholesale price of the commonly stocked package size minus 9 percent for each ingredient. Secondly, the maximum product cost component reimbursement for any one non-sterile compounded prescription is $600.

The dispensing fees for compounded prescriptions, payable only to pharmacists, remain unchanged at $12.50 for non-sterile compounds and $25 for sterile compounds.

New York

New York Attorney General Eric T. Schneiderman applauded the release of data documenting the success of the state’s program to prevent prescription drug abuse, the Internet System for Tracking Over-Prescribing Act, known as I-STOP. The I-STOP program implemented a real-time database in August 2013. Physicians are required to consult it before writing prescriptions for Schedule II, III or IV controlled substances. Pharmacists are required to report in real time each time they fill a prescription for Schedules II, III, IV or V drugs. They are also required to consult the database before filling such prescriptions. New data shows that more than 66,000 New York health care professionals have queried the database on more than 7,000,000 individual prescription checks on nearly 3,000,000 different patients since inception.

The I-STOP program is credited with helping prescribers avoid dangerous drug interactions and detect drug abusers using pharmacies as suppliers. New York is expecting additional progress in the fight against prescription drug abuse in March 2015, when I-STOP mandates e-prescribing for all drugs, a move the state believes will eliminate the current problem of forged, traded or stolen prescriptions. More information on I-STOP is available on the New York Attorney General’s website www.ag.ny.gov/feature/i-stop.


The Kentucky Department of Workers’ Claims (DWC) is proposing fee schedule changes that will replace the current 2010 fee schedule. Pursuant to KRS 341.035, the department is required to review and update the schedule of fees, if appropriate, every two years. Several significant changes are being proposed to the Workers’ Compensation Schedule of Fees, including clarification language that will address repackaging of medications in a physician’s office.

The proposed language states, “If a drug is repackaged by a physician, the average wholesale price is determined using the National Drug Code (NDC) of the original product from the manufacturer. The physician shall include the NDC from original manufacturer with the invoice. Invoices that do not include the NDC of the original product may be returned to physician as incomplete.” This new regulation will allow for the continued practice of physician dispensing but at prices comparable to those charged by pharmacies.

Healthesystems attended a public hearing on February 25, 2014, at the offices of the Department of Workers’ Claims. The DWC accepted written comments until February 28, 2014. The DWC has reviewed the written and verbal comments submitted by interested stakeholders and posted responses on its website. The proposed changes can be viewed on the Department’s website http://tiny.cc/workersclaims


The Michigan Workers’ Compensation Health Care Services (HCS) Advisory Committee is developing rules to establish a reimbursement methodology for compound drugs. The current draft would allow reimbursement of compounds upon preauthorization by the carrier or employer. The draft rule requires the prescriber to demonstrate the effectiveness and safety of the compound through peer-reviewed medical and scientific literature. Active component ingredients of the compound must have NDC numbers and must be FDA-approved drugs that have not been withdrawn or removed from the market for safety reasons. Compound drugs will be billed by listing the quantity of each component drug and its NDC number. Reimbursement will be based on the total of AWP minus 10 percent of each ingredient, plus the cost of the inert ingredients at manufacturer’s original invoice cost, as well as a single dispense fee of $5.50.

In its current format, the rule will be difficult to implement. Information supporting the automation of a process to identify a compound drug ingredient as inert may not be readily available in drug pricing databases, therefore changes may be expected before the rule is finalized.

The HCS Advisory Committee is also drafting rules to regulate the use and reimbursement of opioids for chronic, non-cancer pain. The current draft links physician reimbursement to compliance with treatment parameters, and requires reimbursement for opioids for chronic pain when the medication is medically necessary. To receive reimbursement for opioid treatment of pain, physicians would be required to submit a written report to the insurer no later than 90 days after the initial opioid prescription fill for chronic pain, and every 90 days thereafter. Draft rules specify the content of the report, inclusive of such requirements as mandatory urine drug screening, an opioid contract signed by the injured worker and the attending physician, review of data from the Michigan Automated Prescription System (MAPS) and consideration of weaning the patient from opioids. The rule would also permit physicians to bill for additional services associated with complying with the rule, including a $25 charge for accessing the MAPS database.

A potential obstacle to the implementation of both the compound and opioid rules is Michigan, which law, does not currently support a prospective utilization review process. Healthesystems is working with interested stakeholders and provided feedback relating to both rules to HCS Advisory Committee members.


The Texas House of Representatives and the Texas Division of Worker’s Compensation (DWC) released lists of studies they would like to complete before the next legislative session convenes in January 2015. Items to be studied include the state’s closed drug formulary, medical costs and utilization, and prescription drug use.

Closed Formulary – The Division of Worker’s Compensation will study the impact of the state’s closed drug formulary on utilization and cost patterns in pharmacy prescriptions and conduct an annual update of medical costs and utilization in the Texas workers’ compensation system. Both studies are required by state law.

Prescription Drug Use – The Texas House Committee on Public Health will study the prevalence of the use of prescription drugs, such as opioids for non-medical use, and make recommendations for steps that can be taken to limit this form of drug abuse. Another study will look for recommendations on how the system of licensing, regulation and monitoring of compounding pharmacies can be improved. The committee will also review the joint work conducted by the Texas Board of Pharmacy, Department of State Health Services and the U.S. Food and Drug Administration related to compounds. In addition, it will review the impact of a law passed in 2013 to license and inspect out-of-state pharmacies that create sterile compound drugs, a measure filed in response to the 2012 outbreak of fungal meningitis resulting from tainted injections from a compounding pharmacy in Massachusetts. The current system for dispensing biologics (drugs synthesized from living organisms or their products) and biosimilars (highly similar versions of other biologics, also known as follow-on biologics) will also be studied. Recommendations will be made on how biologics and biosimilars may be substituted for each other or for chemical drugs.



State regulators are seeking ways to control the rising costs of compound drugs dispensed to injured workers. With use increasing, the Mississippi Workers’ Compensation Commission (MWCC) adopted a rule for compound cream medication as part of their Medical Fee Schedule update, effective November 1, 2013. The rule caps reimbursement for compound creams to $300 for 120 grams per month. Doctors would have to supply additional documentation and obtain preauthorization for anything over the 120-gram limit. The commission felt that limiting reimbursement on compound creams would help curb costs since the price being charged by drug compounding companies and doctors for topical creams prescribed to treat pain is very high. The medical fee schedule is not available on the Commission’s website but can be ordered through optumcoding.com (keyword: Mississippi Workers’ Comp) 



House Bill 396 was filed to require prescribers of controlled substances, except veterinarians, to annually register with the Idaho Board of Pharmacy to obtain online access to the controlled substances prescriptions database, the state’s prescription drug monitoring program (PDMP). The bill was signed by the governor on March 14, 2014. The law will become effective on July 1, 2014. The full text of HB 396 can be viewed on the Legislature’s website, www.legislature.idaho.gov/legislation/2014/H0396.htm.



Indiana Senate Bill 294, filed on January 8, 2014, will amend the workers’ compensation law that currently limits reimbursement of repackaged drugs to prevent physicians from dispensing drugs from the eighth day of injury onward. The bill will also add new provisions to the law that will limit reimbursement to a medical service provider to no more than one office visit for each repackaged drug prescribed. The bill passed both houses of the legislature and has been signed by the governor. It will become effective July 1, 2014.




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