Including cost-effectiveness data in formulary review

April 26, 2015

Incorporating cost-effectiveness data into a formulary plan helps shift the conversation from cost to value when considering which drugs to include.

As healthcare costs continue to rise, employer-sponsored health plans increasingly are faced with the challenge of managing cost without limiting access to high-value treatments essential to maintain health for their members.

To balance net clinical benefit with treatment cost, health plans should consider including cost-effectiveness data in their formulary review process, according to John Watkins, PharmD, pharmacy manager of Formulary Development for Premera Blue Cross in Mountlake Terrace, Washington.

Incorporating cost-effectiveness data into a formulary plan helps shift the conversation from cost to value when considering which drugs to include, explained Watkins, speaking at the Academy of Managed Care Pharmacy (AMCP) meeting during a session entitled Pharmacoeconomic Modeling: Applying Value to Formulary Management.  The value-based formulary benefits offer a scientific and nuanced approach to achieving the balance between net clinical benefits and treatment cost, he emphasized.

To illustrate the benefit of including value-based formulary in a health plan, Kai Yeung, PharmD, a University of Washington student who is evaluating Premera’s project for his doctoral dissertation, walked participants through a pilot program using a value-based formulary designed by Premera Blue Cross implemented in 2010. The pilot program was implemented because of the almost 10% increase in pharmacy benefit costs projected over the next year if the health plan remained using the existing three-tier payment structure.

Using the value-based formulary, members were moved to a four-tier design that added a preventive tier that required no copayment along with four tiers in which copays were substantially increased.

Although this resulted in a 10% cost share increase to all members, those with chronic conditions including hypertension, diabetes, and hypercholesterolemia had considerably lower average increases.

Overall, using the value-based formulary resulted in an 11% reduction from projected pharmacy costs for the health plan with generally no significant impact on medication use and adherence.

According to Yeung, early evaluations of the pilot program suggest that value-based formulary is associated with lower total drug spending and that despite the overall increase in copays for diabetes, hypertension, and hypercholesterolemia, utilization of and adherence to drugs to treat these conditions were not negatively affected.

Although Watkins said that including cost-effectiveness data in the formulary review process may take some effort in the beginning, he encouraged managed care pharmacists to do so, saying they will be surprised at what they already know of “what is needed to critically appraise economic studies.”