Meeting_Body
FINANCE, BUDGET, AND AUDIT COMMITTEE
SEPTEMBER 17, 2026
Subject
SUBJECT: PHARMACY BENEFIT MANAGEMENT FOR THE WORKERS’ COMPENSATION PROGRAM
Action
ACTION: APPROVE RECOMMENDATION
Heading
RECOMMENDATION
Title
AUTHORIZE the Chief Executive Officer to award a firm fixed unit rate Contract No. PS134759000 to Matrix Healthcare Services, Inc., dba MyMatrixx, to administer and manage pharmacy benefits, and process and pass through prescription medications for Metro’s Workers’ Compensation Program (the “Program”) in the Not-To-Exceed (NTE) amount of $9,672,000 for the initial three-year base term, $3,256,000 for the first, one-year option, and $3,320,000 for the second, one-year option, for a total NTE amount of $16,248,000, effective October 5, 2026, subject to the resolution of any properly submitted protest(s), if any; and
Issue
ISSUE
Metro does not have an established Pharmacy Benefit Management program to efficiently manage workers’ compensation (WC) claims. A dedicated contract is an effective tool to control prescription costs, ensure injured employees receive safe, injury-related medication, and streamline the WC claims management process.
Background
BACKGROUND
Metro’s FTE workforce of 12,300 employees reports an average of 1,600 WC claims annually, with approximately 2,400 open claims currently managed. The WC division administers the following California mandated benefits:
• Medical Care - Treatment to help an employee recover from a work-related injury or illness, including physician visits, diagnostic tests, medications, medical equipment, and necessary travel costs.
• Temporary Disability Benefits - Wage-replacement payments for employees who are unable to perform their usual job duties during recovery.
• Permanent Disability Benefits - Payments for employees who do not fully recover from their work-related injury, providing compensation for a measurable permanent loss of physical or mental function.
• Death Benefits - Financial support provided to a deceased employee’s spouse, children, or other dependents when a work-related injury or illness results in fatality.
• Supplemental Job Displacement Benefit - A voucher to assist with retraining or skill enhancement for eligible employees who do not return to work or receive permanent disability benefits.
The WC division, comprising of 35 FTEs, supports employees injured on the job and processes their benefits. The division also provides responsive customer service, processes medical bills promptly, and reviews all incoming legal and medical correspondence in strict compliance with the California Labor Code timelines.
The WC landscape in California continues to evolve, presenting increasing challenges for employers like Metro with large WC programs. These complexities are largely driven by rising costs of litigation, an increase in complex cumulative trauma claims, and significantly higher state regulatory assessments.
To address these challenges, the WC division is committed to enhancing the delivery of WC benefits by adopting industry best practices, such as implementing a PBM program to ensure employee safety, streamline claims management, and contain costs. Implementation of the PBM will improve the current process which lacks a centralized approach to pharmacy management. The existing process falls upon each individual adjuster to approve over the counter medication and submit all others through Utilization Review. Additionally, each adjuster must field pharmacy or injured employee inquiries regarding prescription dispensing.
Discussion
DISCUSSION
Pharmacy Benefit Managers (PBMs) act as intermediaries between workers' compensation insurers or employers, pharmacies, and drug manufacturers. In California, they manage the prescription drug portion of injury claims by processing payments, enforcing clinical guidelines to ensure medications are tied to the workplace injury, and managing costs. PBMs perform several core functions, including:
• Claim Adjudication - They verify if an injured worker's claim is open and process and pass through real-time billing directly at the pharmacy counter, so the worker does not pay out-of-pocket.
• Clinical Management - They review prescriptions to prevent dangerous drug interactions, monitor against excessive opioid use, and ensure medications align with the diagnosis.
• Formulary Compliance - They enforce statutory rules (like the California Division of Workers’ Compensation Formulary) that dictate which medications are preferred or require prior authorization.
• Network Contracting - They negotiate discounted pricing with a network of retail and mail-order pharmacies.
Staff continues to leverage best practices to enhance the WC program. In FY26, medical costs accounted for 27% of the overall Program costs, of which pharmacy costs are a component. The annual average pharmacy spend from FY22 to FY26 was $1,792,158. Industry benchmarks indicate that PBM partnerships can reduce pharmacy spending by 15% to 25% while improving compliance and safety. These savings are achieved by enforcing state fee schedules, utilizing customized formularies, and intercepting expensive, non-approved drugs before dispensing. Further, the recently signed California Senate Bill 41 requires that 100% of drug manufacturer rebates be passed directly to the payer.
In addition, PBM implementation will significantly streamline the claims management process for Metro’s in-house claims staff. By automating real-time pharmacy-counter eligibility verification, managing the entire prior-authorization workflow for non-formulary drugs, and handling direct pharmacy dispute resolutions, the PBM removes highly technical, manual clerical tasks from Metro’s internal team. This automation allows Metro’s in-house adjusters to redirect their time toward core case management, accelerating overall claim closures.
The five-year NTE pass-through costs for the base term and option periods is estimated based on annual average projections plus claims experience inflation. Annually, Metro averages about 4,800 prescriptions.
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
Receiving timely medical care is critical to injured Metro employees. Approval of this item will support the WC division’s ability to administer claims promptly.
Financial_Impact
FINANCIAL IMPACT
The FY27 Budget includes $2.1 million for the contract and pass-through pharmacy payment in Cost Center 0531, Non-Departmental - Operations Risk Management, under Project 100004, PRMA - Workers’ Compensation.
Since this is a multi-year contract, the cost center manager and the Chief Risk, Corporate Safety, and Asset Management Officer will be accountable for budgeting the cost in future years, including any options exercised.
Impact to Budget
The source of funding for this action will come from federal, state, and local funding sources that are eligible for bus and rail operations.
Equity_Platform
EQUITY PLATFORM
The proposed action supports Metro’s ability to safely serve the communities and customers who rely on Metro’s transportation services and assets by promoting the use of industry best practices to reduce costs associated with administering Metro’s WC program.
The Diversity and Economic Opportunity Department (DEOD) did not recommend a Small Business Enterprise (SBE)/Disabled Veteran Business Enterprise (DVBE) goal for this procurement due to the lack of certified small businesses that perform the required services.
Vehicle_Miles_Traveled_Outcome
VEHICLE MILES TRAVELED OUTCOME
Vehicle Miles Traveled (VMT) and VMT per capita in Los Angeles County are lower than national averages, the lowest in the SCAG region, and on the lower end of VMT per capita statewide, with these declining VMT trends due in part to Metro’s significant investment in rail and bus transit.* Metro’s Board-adopted VMT reduction targets align with California’s statewide climate goals, including achieving carbon neutrality by 2045. To ensure continued progress, all Board items are assessed for their potential impact on VMT.
While this item does not directly encourage taking transit, sharing a ride, or using active transportation, it is a vital part of Metro operations, as it provides workers’ compensation pharmacy services in accordance with State-approved fee schedules and helps reduce medical expenditures. Because the Metro Board has adopted an agency-wide VMT Reduction Target, and this item supports the overall function of the agency, this item is consistent with the goals of reducing VMT.
*Based on population estimates from the United States Census and VMT estimates from Caltrans’ Highway Performance Monitoring System (HPMS) data between 2001-2019.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
The recommendation supports strategic plan goals #1), “Provide high-quality mobility options that enable people to spend less time traveling,” and #5), “Provide responsive, accountable, and trustworthy governance within the Metro organization.” This Board action supports the use of industry best practices that reduce costs associated with the administration of the Program.
Alternatives_Considered
ALTERNATIVES CONSIDERED
The Board may elect not to approve the recommendation. This option is not recommended because relying on existing internal process limits Metro’s efforts to contain rising Program costs, causes the agency to miss out on significant pharmacy savings through negotiated discounts and fee schedules, fails to capture 100% of drug manufacturer rebates mandated by California law, and results in longer claim closures and limited support for injured employees.
Next_Steps
NEXT STEPS
Upon Board approval, staff will execute Contract No. PS134759000, with Matrix Healthcare Services, Inc., dba MyMatrixx, to administer and manage pharmacy benefits for Metro’s Workers’ Compensation Program, effective October 5, 2026.
Attachments
ATTACHMENTS
Attachment A - Procurement Summary
Attachment B - DEOD Summary
Prepared_by
Prepared by: Claudia Castillo del Muro, Executive Officer, Risk Management, (213) 922-4518
Reviewed_By
Reviewed by: Kenneth Hernandez, Chief Risk, Corporate Safety, and Asset Management Officer, (213) 922-2990
Mat Antonelli, Chief Vendor/Contract Management Officer, (213) 893-7114
