It happens in health plans all over the country: Pharmacy and Therapeutics Committees meet to consider the placement of a
new drug on the formulary. A drug company representative has provided the dossier, including a cost-effectiveness (CE) model
that meets the requirements laid out by the Academy of Managed Care Pharmacy (AMCP) Format for Formulary Submissions. It seems
like a slam dunk. The model demonstrates that the drug is cost-effective; while it costs 50 percent more per pill and has
a rare-but-catastrophic side effect, it results in a 50 percent increase in quality-adjusted life years (QALYs) compared to
Jill Van Den Bos
Then the committee starts asking questions:
- How will the older-than-average age of our population affect outcomes?
- How does this intervention stack up against other available treatments?
- QALYs are too subjective. What about the reimbursement, utilization, and morbid-outcome assumptions made in modeling these
- What are the expected impacts on pharmacy, hospital, and physician budgets?
Clearly, these questions go beyond the generic cost-effectiveness results typically provided by manufacturers. Such questions
include requests for information tailored to a health plan, with overt specification as to the greater impacts of formulary
decisions on the health plan as a whole as well as its members and specific demonstration of value compared with competitors.
While CE model results are worthwhile, especially in coming to a yes-or-no coverage decision—e.g., "the $45,000 per QALY gained
passes our test for inclusion as a preferred drug"—they don't help with monitoring of experience or health plan pricing. To
do this, the information provided would need to show elements of a health plan budget, as well as how utilization and per-member
per-month (PMPM) claim costs may be impacted by the addition of the new drug. This is most useful for pricing and monitoring
of experience compared with expectation, both important financial functions within a health plan.
The Model Cost Model
Consequently, pharmaceutical man-ufacturers should consider the importance of providing information that catches the attention
of those outside the P&T Committee, particularly the actuarial department. Pharmacoactuarial analysis produces economic models
that can help companies meet AMCP guidelines and demonstrate a treatment's value in a way that formulary committees can understand