Summer 2018

State of the States



Sandy Shtab, Healthesystems AVP of Advocacy and Compliance, comments on regulatory activity around the country.


The arrival of summer signals the end of most state legislature sessions for the year, and looking back on the 2018 legislative agenda, there have been increasing efforts to address our national opioid crisis. Even the most casual observer faces exposure to current developments about opioid policies in social media, print, and the evening news. Local and national media outlets have begun to report on the progress of opioid-related initiatives, and with good cause.

According to the Substance Abuse and Mental Health Services Administration (SAMHSA), there are an estimated 2.4 million Americans who have an opioid use disorder. To gain some perspective on this figure, the city limits of Chicago has an estimated population of 2.8 million.

While many of us are attending graduation parties, preparing kids for summer camp, or packing for much-anticipated vacations, there are still regulators at work developing rules to protect patients and support medical decision-making. Some regulations in progress offer support to physicians caught in a difficult situation when patients demand more opioids when they are not safely indicated. Some rules expand access to the life-saving overdose antidote naloxone, which is now available at many retail pharmacies without a prescription. Other efforts limit the days’ supply of an opioid to three, five, or seven days. Retail giant Walmart even recently announced that their pharmacists will no longer fill any opioid prescriptions for more than a seven-day supply, even where there is no legislation in place requiring them to do so.

All these efforts are intended to save lives and help reverse the effects of the opioid crisis. We have seen shifting attitudes around pain management and opioids in workers’ compensation for years, and the rest of the public is just now catching up to our industry. We know the consequences of the now disproven belief that “more pain equals more opioids.” The White House and Justice Department held a joint Opioid Summit in March on this topic. Even the FLOTUS included an opioid abuse prevention campaign within her recently launched Kids Initiative.

While others have said we cannot regulate ourselves out of the opioid crisis, there has been a great deal of time, money, and effort being poured into regulations designed to combat the opioid epidemic. As the rest of our nation catches up to the great work pioneered in workers’ compensation to help tamp down this epidemic, we will begin to see the downturn in the reported illeffects of this national healthcare crisis.


The rise of opioid reform is undeniable, but North Carolina’s Medical Board is concerned with physician and pharmacy compliance with new opioid laws. The Department of Health & Human Services (DHHS), with the assistance of Blue Cross (the state’s largest health plan), attempted to measure compliance through prescribing data, and they have concerns about widespread non-compliance regarding the number of opioid prescriptions written for greater than a five-day supply.

In a recent Medical Board meeting, agency staff questioned the validity of the preliminary data from DHHS and Blue Cross, suggesting the data is incomplete and would require further investigation. Medical Board staff initiated over 2,500 provider investigations in 2017 alone, indicating that they do not have staffing to pursue investigations into prescriber behaviors beyond what they are currently doing.

In regard to these developments, how can we measure and enforce compliance by prescribers, pharmacists, and even insurers as these new laws are enacted? Similar conversations must be had in other states that have taken a similar approach. As legislation evolves on this issue, states will need to examine post-reform data from prescription drug monitoring programs (PDMPs), health plans, and insurers to understand just how these new prescribing mandates are impacting patient care and prescriber and pharmacist compliance.

It will be interesting to see how states that have enacted similar limitations in 2018 will measure the impact of these changes and how they will hold physicians and pharmacies accountable for non-compliance. Since January, Arizona, Florida, Hawaii, Michigan, Nevada, North Carolina, and South Carolina have approved similar opioid prescribing limitations.


At over 2,000 pages, the recently enacted federal spending bill, also known as H.R. 1625 or the Consolidated Appropriations Act, 2018, contains an enormous number of rules and stipulations. Among them is an updated policy that renews restrictions on using federal funds to interfere with state-driven medical marijuana programs.

This language is particularly interesting, as earlier this year the Department of Justice (DOJ) shifted away from the prior administration’s marijuana policies, which deferred federal marijuana law enforcement to the regulatory schemes of states. The latest DOJ memo on the topic empowered federal prosecutors to enforce federal laws against marijuana in states where decriminalization has been enacted, effectively bringing a high level of uncertainty to how state-driven medical marijuana programs would be impacted across the country. Now, it appears that the spending bill will prevent the DOJ from enforcing the initiatives of the memo, effectively maintaining the status quo of Obama-era policies, which allowed states to pursue marijuana legalization efforts without federal interference. As of April 2018, 10 states plus the District of Columbia have legalized marijuana for adult recreational use, and forty-four states have varying degrees of medical use permitted.

Furthermore, Senate Minority Leader Chuck Schumer recently announced his intention to introduce legislation which would decriminalize marijuana on the federal level, removing it entirely from the Drug Schedule established under the Controlled Substances Act. The bill has yet to be formally introduced, however support for marijuana continues to grow with more than 64% of all Americans supporting legalization.


The U.S. Food and Drug Administration (FDA) announced their 2018 Compounding Policy Priorities Plan, outlining how the agency will implement more robust oversight over compounders, enabling closer federal and state collaboration. The plan aims to provide legal framework that meets legitimate patient need for compounded medications, while also giving the FDA tools to address unlawful compounding practices that threaten public safety.

As compound drugs by their customized nature often do not undergo FDA testing for safety or efficacy, they have often been linked to various recalls and safety issues, including a 2012 fungal meningitis outbreak that resulted in 64 deaths, infecting 753 known individuals.

The plan specifically details how the FDA will:

  • Address manufacturing standards for outsourcing facilities
  • Regulate compounding from bulk drug substances
  • Restrict compounding of drugs that are essentially copies of FDA-approved drugs
  • Solidify the FDA’s partnership with state regulatory authorities
  • Provide guidance on other activities that compounders undertake


The National Council of Insurance Legislators (NCOIL), an organization comprised principally of legislators serving in state insurance and financial institutions around the nation, drafted a model law for use by state legislators to combat the patient risks and medical costs associated with physician dispensing and compound medications. The draft was discussed extensively at a March meeting in Atlanta, however it has not yet been formally adopted.

The draft limits physician-dispensed prescriptions to a seven-day supply for initial treatment, and injured workers would then have to visit a retail pharmacy to obtain future medications. Exceptions to the policy are limited to patients who do not have a retail pharmacy within 20 miles of their home or work location, or if emergency situations occur. Insurers and employers would be allowed to require documentation of medical necessity or utilization review of compound medications, allowing insurers and employers to restrict compound reimbursements to pharmacies within a designated network.

Finally, the model law also tackles repackaged drugs, stating that only original NDCs may be used. Discussions on this topic will continue at the upcoming NCOIL Summer meeting in Salt Lake City, Utah from July 12-15th.

Industrial Commission Expands Use of Medical Treatment Guidelines

The Arizona Industrial Commission adopted the Official Disability Guidelines (ODG) in 2016 for the treatment of chronic pain and for the use of opioids for all stages of pain management, but it wasn’t until December that the Commission declared ODG will become applicable to all injuries. The Commission also sought to streamline the authorization process by requiring providers to use the official Medical Treatment Pre-Authorization Form, while also shortening the timeframe for payers to respond to an authorization request from ten to seven days. The proposed rules are set to become effective on October 1, 2018.

Arizona is also in the process of updating its Physicians’ and Pharmaceutical fee schedule, also with an effective date of October 1st. Regulators are consulting with physician, employee, business, and industry stakeholders on how outpatient medications should be reimbursed when dispensed outside of a retail or mail order pharmacy setting that is not generally accessible to the public, as required by the passage of Senate Bill 1111. “Closed-door” pharmacies have become a niche business operation in the workers’ compensation space and are thought to be contributing to pharmaceutical cost increases in the last few years.

Formulary to Go Live July 1st

Effective July 1, 2018, the Arkansas Workers’ Compensation Commission will adopt the formulary developed and maintained by the University of Arkansas Medical Sciences (UAMS) College of Pharmacy, which has been in place for state employee claims since 2013. The formulary will limit initial opioid prescriptions and subsequent fills unless prior authorization is received. Prescribers will now be required to check the state’s prescription drug monitoring program, AWARxE, prior to prescribing opioids or benzodiazepines. Arkansas is one of few states to adopt a formulary independent of evidence-based treatment guidelines.

Formulary Fully Implemented

The California Division of Workers’ Compensation (DWC) drug formulary went live in January and is anticipated to decrease the utilization of opioids and reduce frictional costs related to utilization review and independent medical review for medications. There are currently several researchers and policy experts already evaluating preliminary data, and a published study is certain to be forthcoming on the topic in the coming months.

This May, the DWC adopted a new section into the formulary to address injuries and diseases of the eye. For parties interested in an overview of the formulary, the DWC posted an hour-long webinar on YouTube at

New Fee Schedules for Interpreters and Medical/Legal Services

The DWC proposed changes to the interpreter fee schedule as well as the Medical/Legal fee schedule on the public forum section of their website. Both regulation changes have been in the works for several years, with the initial draft of the interpreter rules published in 2015. Public comments received for both proposals are available for review on the DWC’s website. The timeline for formal rulemaking is undetermined at this time, though both proposals have received significant input from stakeholders and will likely be modified further prior to formal rulemaking.

These pending regulations are the few remaining regulations which must be developed and adopted by the Department of Industrial Relations under Senate Bill 863, passed in 2012.

Drug List for Physicians and Payers in Development

Colorado’s Division of Workers’ Compensation (DWC) recently assembled a Medication Guide Task Force to explore how best to incorporate a medication list for physicians and payers to consult in tandem with the state’s medical treatment guidelines. Healthesystems will participate, providing recommendations to further assist physicians and insurers in operationalizing the treatment guidelines to ensure better adherence.

The DWC also published an update to its chronic pain guidelines and complex regional pain syndrome guidelines, both which contain recommendations on prescribing opioids and prescribing opioids in conjunction with sedative hypnotics. These guidelines will take effect November 30th, but physicians can begin using them now, as they represent the most current available medical evidence. Further updates to the medical treatment guidelines may be released in the coming months as noted in the DWC 2018 regulatory agenda.

ODG Drug Formulary

Indiana Governor Eric Holcomb signed Senate Bill 369 into law, requiring the implementation of an evidence-based drug formulary for workers’ comp claims and prohibiting reimbursements for drugs specified as “not recommended” in the Official Disability Guidelines (ODG). What was unusual about this legislation is that the new law does not require any regulation development on the part of the Indiana Workers’ Compensation agency. Agency staff indicated they have no plan to promulgate any rules about the formulary, how legacy claims are managed or how disputes shall be resolved. There is some indication they may produce some guidance documents or FAQs for stakeholders to support the process for interested stakeholders.

Beginning January 1, 2019, the formulary will apply to all workers’ compensation claims, regardless of the date of injury. The bill requires prior authorization of non-preferred drugs (“N” drugs) and creates an exemption allowing the use of “N” drugs during a medical emergency.

Formulary Bill Signed into Law

Earlier this year, Governor Matt Bevin signed House Bill 2 into law, calling for sweeping changes to the workers’ compensation system, authorizing the Workers’ Compensation Commissioner to adopt a pharmaceutical formulary on or before December 31, 2018. The projected effective date of the bill is July 13, 2018; however, regulators may already be working on the first draft of the rules, given the short timeframe to implement. Once the new rule is drafted, the law requires it be applicable to all injured workers regardless of accident date.

Formulary Rules in Development

Montana and New York have been working on fact-finding and rule development to implement formularies since 2016, though each state has taken a unique approach to the process.

The Montana Department of Labor and Industry (MTDLI) created a Formulary Committee which has been meeting for over a year to develop a strategy to implement a formulary that works with the Montana Treatment Guidelines. Regulator Bill Wheeler and his staff have hosted meetings on a near monthly basis, making them available to remote participants via video conferencing to gain the broadest participation. Montana has decided on the ODG formulary and will likely begin rulemaking later this year with a potential effective date in April 2019.

The New York Workers’ Comp Board (WCB) solicited input from stakeholders in late 2016, asking for input on a variety of topics ranging from drug rebates to dispute resolution, and the passage of legislation in 2017 now requires the WCB to adopt a formulary which would meet very specific criteria. This prompted the Board to publish a pre-proposed draft rule in December, seeking public comment. Since then, there has been no public rulemaking, though the Board may be working with groups to refine the proposal as it nears the late stages of the rule process.

The NCB also adopted a new impairment guideline which became effective January 1, 2018. These changes came following the 2018 budget mandate from the legislature, which required several reforms to the workers’ compensation system.

Compound Loophole Closed

The Texas Department of Insurance Division of Workers’ Compensation (TDI-DWC) has adopted new compound rules to address a long-standing loophole in their drug formulary rule. A TDI-DWC Evaluation Group published research on compound prescriptions, noting compounded drugs increased by 98% from 2010 to 2015. The new rule requires preauthorization for all compound prescriptions dispensed on or after July 1, 2018.

Quarterly Carrier Meeting

Texas hosts a quarterly carrier meeting which Healthesystems representatives regularly attend. This year the Commission has met with carriers in this forum twice, in March and in June. The Commission stressed the importance of compliance with Utilization Review standards, new regulations on telehealth services, and their recent proposal to require rehab facilities to obtain preauthorization before initiating work-hardening or work-conditioning services to injured workers.

Opioid Audit

TDI-DWC published an Opioids Plan-Based Audit to review opioid prescribing habits and record-keeping in 2016 and 2017. The Audit’s goals are to ensure that healthcare providers adhered to the Official Disability Guidelines (ODG) and medically accepted standards of care for prescribing opioids, promote cost-effective healthcare delivery, and evaluate the appropriateness of healthcare providers’ decisions. TDI also released a report this Spring concerning the impact of the state’s closed drug formulary, showing that since 2009, total opioid costs decreased by 57%.

Protecting Providers Who Don’t Prescribe Opioids

West Virginia Governor Jim Justice signed Senate Bill 273, making it illegal for individuals or groups to retaliate against healthcare providers for not prescribing, dispensing, or administering opioids. The intent of the bill is to prevent litigation against providers, prohibiting insurers from reducing reimbursement to providers for not prescribing opioids. The bill came to be after doctor groups indicated they were being downgraded by patients on satisfaction surveys for failing to prescribe opioids. Because of slipping patient satisfaction scores, physicians stated that their reimbursement levels were declining, as these scores are sometimes used by healthcare networks and insurers as a component of the reimbursement equation.


  1. Ceniceros R. No reprieve from medical costs amid rising price of care. Risk & Insurance. January 17, 2018.


Since 2010, the semi-annual RxInformer clinical journal has been a trusted source of timely information and guidance for workers’ comp payers on how best to manage the care of injured worker claimants and plan for the challenges that lay ahead. The publication is an important part of Healthesystems’ proactive approach to advocating for quality care of injured workers while managing the costs associated with treatment.