The impact of a closed formulary on prescribing patterns in the treatment of injured workers

Prescription drug spending accounts for nearly twenty percent of workers’ compensation (WC) health care costs, and prescription drug overdose is a leading cause of death in the United States. To guide physicians to prescribe safer, less addictive, and more cost-effective drugs, Texas WC implemented one of the first formularies tailored specifically for the treatment of work-related injuries by establishing a list of non-preferred drugs that require preauthorization before they can be prescribed. I draw on Texas WC administrative data on medical and pharmacy bills to examine the impact of the formulary on health care bills paid for through WC several months after a worker’s initial injury. I find that the closed formulary results in workers being half as likely to use non-preferred drugs and reduces average spending on non-preferred drugs by half several months after claims begin. I find no evidence that spending on preferred drugs or spending on non-pharmacy medical care increase to compensate for the decreased spending on non-preferred drugs. The lack of a shift towards preferred drugs suggests that doctors were not choosing non-preferred drugs over preferred drugs prior to the formulary. Instead, non-preferred drugs were one of multiple approaches doctors used in treating work-related injuries.