Applying a Pharmacoeconomic Model to Formulary Drug Decisions

As more high-cost drugs reach the market, the meaning of value gains more attention, especially in the specialty pharmacy market. One way to assess value is to use a cost-effectiveness analysis to guide formulary decisions.

As more high-cost drugs reach the market, the meaning of value gains more attention, especially in the specialty pharmacy market. One way to assess value is to use a cost-effectiveness analysis to guide formulary decision.

During the session “Pharmacoeconomic Modeling: Applying Value to Formulary Management,” the speakers highlighted how to create an effective model and the results after the first year of implementation of Premera Blue Cross’ value-based formulary.

Clinical evidence drives economic modeling more than any other factor, explained John Watkins, PharmD, MPH, BCPS, pharmacy manager for formulary development at Premera Blue Cross.

From a clinician’s perspective a good model does 3 things: addresses decision makers’ information needs, has “real world” clinical relevance, and uses a transparent methodology.

“Models can serve as a bridge between the clinical trial and the real world,” Dr Watkins explained. “They allow you to do some ‘what ifs’ or sensitivity testing.”

His colleague, Dan Danielson, MS, RPh, pharmacy manager of clinical services at Premera, explained how Premera came to a formulary decision for hepatitis C therapies by walking through the steps the insurance company took.

In the case of Harvoni and Viekira Pak, which were almost equal when it came to safety and efficacy, after looking at the clinical evidence the company analyzed the economic evidence. Premera ended up figuring out how much it would cost for its population for each of the drugs.

Using this value-based approach to place drugs on its formulary, Premera implemented a value-based formulary. The results of the first year of the model were recently published in the Journal of Managed Care & Specialty Pharmacy.

The average drug copay has mostly increased faster than the rate of inflation, explained Kai Yeung, PharmD, MS, PhD candidate at the School of Pharmacy at the University of Washington, explained.

“The problem is that these copay increases are based on the cost of the drug, rather than the value that these drugs provide to the patient,” he said. “This might incentivize the use of drugs strictly based on cost and not value, leading to the potentially inefficient use of drugs.”

The Premera value-based formulary evaluated each drug based on its incremental cost-effectiveness ratio (ICER). Those drugs with a low ICER, which have high value, were placed on lower tiers.

After the first year of implementation, the researchers found that the observed costs per member per month were lower than they had expected to be based on the previous 36 months of data. From the health plan perspective, costs decreased 11%.