A model of formulary decision making that evaluates medications based on usage could have significant implications for providers, consumers, and manufacturers.
In a recent editorial, I discussed Pharmacy and Therapeutics (P & T) Committee activities, and how decisions are made by organizations utilizing this committee model of formulary decision making. Historically, medications were evaluated for their safety and efficacy profiles on a population basis, and across all indications.
Recently, we have begun to see changes in the model. P & T committees have started to evaluate medications at the individual indication level. The implications for this are widespread across multiple stakeholders.
Indication level analysis and evaluation of medications is not entirely new. When I was leading the P & T Committee at CVS Health, although it was not the norm, we would occasionally look at a medication’s safety and efficacy profile at the indication level.
Over the last few years, this methodology has slowly increased in frequency. In a recent press release, Express Scripts stated that their P & T Committee will be changing to a diagnosis-driven utilization and formulary placement model. Express Scripts may not be the first company to take this action, but they are the first of the large national pharmacy benefit managers (PBM) to publically announce this change.
You may ask the question as to why P & T Committees are making this change? I believe that there are several reasons. The first, and potentially the biggest reason, is healthcare’s focus on value.
As we look at the decisions we make, and the actions that we take under the microscope of value, we will need to become more granular. Medication decision making is no different from other areas within healthcare where this is occurring.
We need to make sure that the actions we are taking are commensurate with the costs of that decision and action. Is this medication likely to be medically effective and cost-effective in treating this condition? Historically, medication costs were not significant enough within healthcare spend to devote time or energy on this type of evaluation. As medication costs have risen, the need for value appraisal becomes necessary.
One subset of medications that may have increased the speed for which this model has taken hold are orphan drugs. A recent report published by American Health Insurance Plans (AHIP) found that nearly half (47%) of all orphan drugs developed between 2012 and 2014 were used for non-orphan drug diseases.
Historically, orphan drugs were able to charge higher costs due to the lack of alternatives for treatment of these conditions. In addition, the small number of people who would benefit from the drug made it harder for the manufacturer to recoup their research and development costs without the higher price point.
As providers begin to prescribe these medications for a broader subset of patients, the reasoning for higher prices erodes, and the cost implications have had a greater impact on both the health system and patients. Manufacturers have responded to this change either by indication-based pricing or by lowering the cost of the drug as it is used beyond the orphan indication.
In general, I like the approach of evaluating and creating formulary placement based on indication use. As healthcare becomes more personalized, value focused, and less process focused, looking at medications based on their usage makes a great deal of sense. That being said, this model is not without its challenges, and can have significant implications for providers, consumers, and manufacturers.
Let’s start with the prescribing provider. It is not unusual for providers to prescribe medications off label. This has been going on for many years.
In fact, in areas such as oncology, it is quite common. In addition, providers have long stated that it is nearly impossible to know what is on their patient’s formulary.
Therefore, their prescribing is based on the medications that they believe will work for their patient, and not on evidence or formulary placement. Over the last few years, there has been greater scrutiny on the prescribing habits of providers.
As the indication-specific methodology of medication evaluation and coverage increases, this will only bring greater confusion for providers. Furthermore, providers will not only have to know if a drug with associated scientific evidence is covered, and under what tier, but also go a step further and find out the coverage and tiering of the medication based on the indication or diagnosis treated. I believe this has the possibility of confusion and frustration for the provider.
Meanwhile, providers will not be the only stakeholder confused and frustrated by the indication-based formulary model. Patients will also have to deal with the issue. Providers often choose medications that they know well, or medications that they have recently heard about.
They rarely take into consideration the true value including not only evidence, but also what it will cost them. We have begun to educate patients to utilize tools offered by their PBM or their health plan to identify what medications are covered under their plan. These documents will potentially become more cumbersome, as the medication coverage will no longer be medication-specific, but medication indication-specific.
These new challenges do not create obstacles that cannot be overcome. It will take time, education, and technology for these 2 stakeholders to become comfortable with this evolution of medication coverage. Clarity in explanation is important.
Explaining to providers and patients the reasoning behind this change should create a united stand for this new model. I believe that once both parties understand the reasoning behind the change in model, they will embrace it.
Providers are looking to help their patients to feel better, and therefore, should appreciate the evaluation at a diagnosis level of a medication. Evidence-based prescribing is something we all should be striving for. The increased use of decision support technology will also aid in the transition to indication-based medication prescribing and coverage.
It will be the responsibility of those creating the formularies to create these types of tools for both the provider at the time of prescribing, as well as the patient in understanding their cost responsibility.
Value-based or indication-based formularies are clearly the formulary management methodology of the future. Although we will have to make changes to medication decision making, it is a method that will serve us well as we look to ensure patients are receiving medications that best address their medical problems.