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Prescription Drug Use Decreases by 7.1 Percent (381,000 Fills) Because Prescribers Write Fewer Prescriptions for Drugs Subject to PR

• Prescription drug spending decreases by 10.4 percent (or $45.4 million) because of the overall reduction in prescribing as well as lower prices for pharmacy-dispensed drugs and generic drugs compared with physician-dispensed and brand-name drugs.
• Different sets of assumptions resulted in lower- and upper-bound estimates of $25.6 million and $76.5 million, respectively.
• Physician dispensing of drugs — which is common in the California Workers' Compensation system — will be less common after the implementation of the formulary because, in many cases, physician-dispensed drugs will be subject to review by payers. This change will reduce provider net income by an estimated $18.3 million.
• In total, the net increase in California gross state product is $2.4 million. The net expected change in employment is an increase of ten jobs.

4.6 Percent of Prescription Bill Lines and 12.1 Percent of Total Spending on Brand and Generic Drugs in 2014 Were for Brand-Name Drugs When an Approved Generic Substitute Was Available

• These results suggest that new prospective review (PR) requirements may lead to changes in prescribing patterns toward generic drugs in specific classes where brand-name prescribing is relatively common (such as psychotherapeutic agents, anticonvulsants, and opioid analgesics).
• Thirty-six percent of prescription bill lines and 34 percent of prescription spending (excluding compounded drugs) were for physician-dispensed drugs in 2014.
• Only a small share of total prescriptions would be exempted from PR based on the special and perioperative fill provisions.

California Assembly Bill 1124 required the state's Division of Workers' Compensation (DWC) in the Department of Industrial Relations to establish a drug formulary for all workers' compensation payers in the state. Formularies in workers' compensation serve to reinforce safe and effective prescribing patterns for practitioners and payers. The objective of this report is to estimate the potential impacts of a California Workers' Compensation formulary in terms of changes in prescription drug use and spending and to discuss the potential broader impacts of these changes on the California economy. This report is the second of three related reports. The first reviewed existing formularies that DWC might consider, summarized their relative strengths and weaknesses, reviewed the options for the related policies that are needed to implement and update the formulary, and made recommendations for the formulary implementation policies and updating process. The third report will describe a monitoring framework for tracking the actual impacts of implementing the drug formulary.

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