Show Us the Value

A new survey reveals what MCOs and PBms really want: Products with value-and the clinical proof that demonstrates Their Worth.
Aug 31, 2003

Affordable healthcare has become a leading political and social hot button in the United States, and managed care organizations (MCOs) have responded by seeking to reduce pharmaceutical expenses to rein in rapidly increasing costs. Historically non-aggressive, MCOs are now behaving like true consumers and demanding that new drugs bring value to the overall healthcare system, relative to the cost and effectiveness of cheaper, older alternatives.

That seemingly simple objective-to link pharmacoeconomic value to formulary access-has resulted in a dramatic paradigm shift called outcomes-based access. OBA policies, which include programs to promote generic drug use and restrict brand-name sampling, are forcing pharma companies to reevaluate the basics of their business model.

The Bruckner Group (BGI) has tracked the inception and growth of outcomes-based access for the past five years, including the 2001 release of a "Format for Formulary Submissions" from the Academy of Managed Care Pharmacy (AMCP). (See PE, "Raising the Bar," November 2002.). In June and July 2003, BGI surveyed executives from the largest MCOs and pharmacy benefit managers (PBMs), representing approximately 80 percent of covered lives. (See "Payers as Decision Makers," page 84.) This article analyzes the results of that survey and highlights how payers perceive the progress of OBA programs and how well pharma companies comply with them.

The New Standard In designing the study, BGI specifically sought to understand

  • the present state of the formulary decision making process
  • the impact of OBA programs (including use of the AMCP format) on the payer sector
  • how MCOs and PBMs perceive their interactions with pharma companies throughout the formulary evaluation process
  • how communication and cooperation between MCOs and manufacturers can be improved to balance their often conflicting needs.

The study's results confirm that outcomes-based access is becoming an established industry standard.

Evaluating value. Nearly 100 percent of MCOs and PBMs now analyze a drug's value when making formulary decisions. To do so, they use use pharmacoeconomic models that are based on outcomes research data and that incorporate the fundamentals of a clinical evaluation: efficacy, side effects, and safety. The analyses seek to determine the relative value of a treatment, both economic and therapeutic, compared with the standard of care: available brand-name treatments and especially generic alternatives. When treatments demonstrate unfavorable value relative to the standard of care, MCOs often reject them for preferential formulary inclusion. And if they do make them available, patients must pay a substantially higher co-pay or the full retail cost.

The AMCP format. MCOs and PBMs, representing approximately 65 percent of covered lives, have officially adopted the format, and nearly all payers use it to some extent. The majority of those using the AMCP format will not review a noncompliant submission unless it represents a breakthrough treatment. The issue of compliance is somewhat moot, however, because survey respondents say 80 percent of formulary submissions are prepared in the AMCP format. Non-compliant submissions come largely from small companies that are unfamiliar with the process.

Lack of substance. Although nominal compliance with the format has been largely achieved, the substance of submissions is more problematic, especially in the key areas of evidence-based outcomes data and "value propositions." Virtually every MCO and PBM in the survey expressed dissatisfaction with the quality and quantity of submissions' outcomes data, pharmacoeconomic arguments, and value propositions. Most have found that when value propositions exist at all, they fail to demonstrate adequate value or are otherwise incomplete or misleading.

That shortfall may result partly from companies' lack of outcomes research capabilities and comprehensive outcomes data. Many of the clinical trials for recently submitted drugs were not originally designed for intensive pharmacoeconomic scrutiny. Companies often scramble to assemble reasonable composite models after the fact.

Fadia T. Shaya, PhD, associate director of the Center on Drugs and Public Policy and assistant professor at the University of Maryland School of Pharmacy, is an expert in outcomes research and has a great deal of experience preparing and conducting pharmacoeconomic studies for both managed care and pharma companies. She says, "It is a learning process for pharmaceutical companies as well as health plans. The process will be better streamlined when there is a critical mass of producers and users of pharmacoeconomic data."