Formulary management activities are an essential component for effectively managing medication utilization, according to experts.
A survey of hospital CEOs found that 57% are concerned about the high prices and insufficient reimbursement for medications. Separately, 51% of executives said innovative approaches to expense reduction was one of their top five priorities in 2019.
“As drug costs remain a fast-growing expense for hospitals, forward-thinking executives understand that effective formulary management has become table stakes in an effort to better manage drug expenses,” says Bonnie Lai, PhD, vice president, product management, Lumere, an organization comprised of clinicians, researchers, pharmacists, and strategic thought leaders focused on helping health systems eliminate unwarranted clinical variation and cut unnecessary costs. “The first step in advancing formulary management is to apply clinical evidence and analytics. This will ensure prescribers and pharmacists in charge of medication management are making decisions with both cost and outcomes in mind.”
Managed Healthcare Executive® (MHE®) talked to Lai; Onisis Stefas, PharmD, MBA, vice president and chief pharmacy officer, Northwell Health, New York State’s largest healthcare provider and private employer; and Russ Funk, PharmD, MHSA, chief executive officer, pharmacy services, Banner Health, one of the largest nonprofit healthcare systems in the country, headquartered in Phoenix, about approaches to formulary management, therapeutic areas to watch, key practical tactics that can be leveraged immediately to improve formulary management, and the role of data analytics in the formulary.
MHE®: How should healthcare executives be approaching formulary management?
Stefas: We approach formulary management by establishing a standardized system formulary that is adopted by all hospitals, ensuring high-value medications are on formulary, thus driving best practice and promoting better patient outcome. We have a centralized system P&T committee that ensures real-time review of newly marketed medications is performed, to determine the potential value the drug provides to the patient population we serve in our organization for formulary inclusion. We assess a medication’s value by evaluating upfront cost and comparing expected versus actual outcome. Furthermore, we examine potential for revenue generation and reduction in total cost of care. Lastly, we implement formulary restriction and guardrails to make certain that medications are utilized in the most appropriate site of care.
Funk: Organizations should strive to have a standardized formulary (including nonacute locations) within a health system. Formulary management is much more than what happens at a P&T committee meeting—it is both strategic and immensely granular at the same time. It is very resource intensive to do it well; organizations should ensure sufficient interdisciplinary resources are in place.
A strong physician leadership structure along with physician leadership support for formulary management activities is important for success. Formulary management activities should be highly integrated and well supported within the organization.
MHE®: What therapies should be on the radar of health executives?
Stefas: In the near future, we foresee innovative therapies including immunotherapies, biosimilars, and individualized medicine based on gene therapy becoming more prevalent in the marketplace. It is prudent that we ensure the right infrastructure is in place to support prescribing of these medications to patients that will truly benefit from these innovative therapies. In addition, it is essential that we have the appropriate process outlined to recoup the outlay of expense associated with these items.
Funk: The cost of medications will be an issue for the foreseeable future, especially in the outpatient setting. Safety, efficacy, and cost have traditionally been at the core of formulary decisions. While this remains true for high-cost outpatient medications, there are additional considerations, such as reimbursement, the optimal site of care, and the organizations level of risk for the patients served (e.g., shared risk). Close collaboration between P&T activities and business line leaders will serve organizations well.
There is a robust pipeline of biosimilars coming to market. While this provides optimism, the overall uptake for biosimilars has been relatively slow, and it remains to be seen how this will affect the rising costs of medications.
Drug shortages will continue to be a challenge across the nation. They are disruptive to patient care, lead to increased drug spend, and can distract from other formulary management activities.
Lai: As hospital revenue from outpatient services continues to increase, pharmacists are rapidly expanding their presence in this setting. Pharmacists are critical to affecting patients’ total cost of care, particularly under value-based payment models. Medications are an investment in patients’ care and well-being. It is of utmost importance that pharmacists and other clinicians have the information that they need to make the best decisions in a complex outpatient landscape: reimbursement and patient out-of-pocket cost, patient risk based on comorbidities, mitigating drug side effects, effectiveness of medication for that patient’s clinical outcomes, and medication adherence.