Informal Draft of Pharmacy Closed Formulary Rules Posted by Texas Department of Insurance

The Division drafted its latest version of the proposed Closed Pharmacy Formulary Rules and asked for informal comments by March 5, 2010.  The Division has been working on the closed formulary for several years.  Significant issues regarding Division resources to address any expected disputes with legacy claims, denials of long standing narcotic prescriptions and other "N" class drugs, dispute resolution processes, and compounding drugs are just a few of the outstanding issues.

The Division believes two set of rules are necessary: one for legacy claims and one for new claims.  These new rules would not subject legacy claims to the closed formulary until January 1, 2013.

A closed formulary includes all FDA approved drugs excluding the "N" class drugs identified in Appendix A of the ODG Workers' Compensation Drug Formulary or any compound containing an "N" class drug. The closed formulary also excludes investigational or experimental drugs that are not yet broadly accepted as prevailing standard of care.

The closed formulary would not begin until January 1, 2011.  Preauthorization for prescription drugs are only required for drugs excluded from the Division's closed formulary.  The Division's adopted ODG Treatment Guidelines apply.  However, prescription and non-prescription drugs included in the closed formulary that exceed or are not addressed by the Division's adopted ODG Treatment Guidelines may be prescribed and dispensed without preauthorization but are subject to retrospective review.  For drugs excluded from the closed formulary, a prescribing doctor, other requestor, or the injured employee may request approval in a specific instance by requesting preauthorization and reconsideration in accordance with Rule 134.600.  If denied, the requestor can request medical dispute resolution in accordance with Rule 133.308.  A carrier's denial must be based on and supported by evidence based medicine substantiating the denial.

The Division defines legacy claims as all dates of injury prior to January 1, 2011. For all injuries prior to January 1, 2011, the closed formulary and the new medical interlocutory orders are not available until January 1, 2013.  Between January 1, 2011 and December 31, 2012, a prescribing doctor should submit a statement of medical necessity with the prescription for drugs excluded from the closed formulary.  The new rules define a statement of medical necessity as the written statement and supporting evidence based documentation from a prescribing doctor establishing the need for treatments, services, prescriptions, including a brand named drug, if available, the employee's name, date of injury, social security number, diagnosis code, whether the drug has previously been prescribed and dispensed; whether the inability to obtain the drug poses an unreasonable risk of a medical emergency, and how the prescription treats the diagnosis, promotes recovery, or enhances the ability of the employee to return or retain employment.

The Rules encourage the insurance carrier and prescribing doctor to communicate about ongoing pharmacological management.  Thus, the Rules require the carrier to designate a point of contact for pharmacological management.

The Rules also require the carrier to identify all remaining legacy claims by July 1, 2012 and provide written notification to the injured employee, prescribing doctor, and pharmacy of the dates and applicability of the closed formulary, the insurance carrier point of contact for pharmacological management, and an identified two week period of time to initiate discussion on each claim.  The parties can enter into agreements regarding pharmacology management.  If no agreements are made, the closed formulary rules will be effective beginning January 1, 2013.

The new rules identify a Medical Interlocutory Order (MIO).  A prescribing doctor or pharmacy can apply for a MIO for a preauthorization denial of a previously prescribed and dispensed drug, excluded from the closed formulary, if the denial poses an unreasonable risk of a medical emergency.  The rules state a MIO will automatically be issued if it contains required information.  A request for reconsideration of a preauthorization denial is not required to request an independent review when pursuing an MIO order.  If a request for reconsideration or an MIO request is not issued within 15 days from the initial preauthorization's denial, the MIO is waived.  If the MIO is submitted after denial of reconsideration, the complete MIO request must be submitted within 5 working days of the reconsideration denial.  Once an MIO is ordered, an appeal of an interlocutory order decision shall be submitted within 5 working days of the date the interlocutory order is sent to the appealing parties.  If the requestor withdraws the medical necessity to dispute, then the preauthorization denial stands.  But the insurance company is now required to notify the prescribing doctor, injured employee, and the dispensing pharmacy if this occurs.

Payments made under an MIO are eligible for reimbursement from the subsequent injury fund.  The insurance company may dispute an interlocutory order once filed and request a hearing.  However, the carrier has no rights to respond to the request for the MIO prior to the Division automatically approving the request.

 Should you have any questions, you may contact Stuart Colburn at scolburn@downsstanford.com or Charles Morse at cmorse@downsstanford.com.