Join ISPOR  | Sign up for mailing List  | Follow Us: LinkedIn Twitter Facebook YouTube
The Official News & Technical Journal Of The International Society For Pharmacoeconomics And Outcomes Research

Developing and Maintaining a Formulary in a Medicare Plan

David Yoder PharmD, MBA, Executive Director, Federal Employee Health Plan Pharmacy Programs, Blue Cross Blue Shield Association, Washington DC, USA

(The following was presented during the First Plenary Session, “New Evidence on Evidence-Based Technology Assessment in the USA vs. Canada,” at the ISPOR 13th Annual International Meeting, May 5, 2008, Toronto, ON, Canada)

This article will examine a Baltimore Based Medicare plan, Bravo Health (formerly known as Elder Health). It will give a sense of the differences between a small plan and a large plan, and will try to compare and contrast that a little bit between the two different types of plans, being as plans get smaller, the resources available to plans become much tighter and work on a much smaller operating budget.

A Pharmacy and Therapeutics Committee, or a P & T Committee as they are more likely referred to, is a committee made up for the health plan to manage the formulary. The committee is an advisory committee to the health plan. They are in charge of reviewing new drugs as they come out within the market, as well as changes in existing drugs. Therefore, if a drug comes to the market as a new chemical entity or it may have been on the market for a year or two, and there may be new evidence for that drug, will actually go back and re-review them for the formulary. The committee is comprised of actively practicing physicians who must be highly motivated to squeeze the P&T activities into their busy patient schedules. As P & T committees are formed, there is a desire to try to find specialists; if there is a limit of 12, some committee members will have to have multiple roles, with the duties spread across primary care physicians, internal medicine specialists, endocrinologists, etc. to balance the committee. If possible, a Medicare plan dealing with a much older population will merit a geriatrician on the committee. As there can be only 12 members, there is not enough room for all of the various specialists to cover every new drug, so sometimes outside specialists are brought into the committee (e.g., oncologists if there will be a review of an oncology drug).

The committee is an advisory committee of the plan. The recommendations are not binding; however their advice is usually followed. Sometimes they may not like a drug that may be clinically appropriate and therefore may be overridden. One of the problems with a small plan is the difficulty in reviewing multiple drugs over the short timeframe of the typical committee meeting. They may review four to six drugs in a single committee meeting that may last an hour to an hour to two hours at most. Many decisions may be made before the meeting, so while the decision is not necessarily a foregone conclusion there is a pretty good idea of what it might be. Committee members cannot be expected to experts in all new drugs, but they do have the practical knowledge of how these drugs are actually used. Therefore, as information is gathered for them, it has to be very concise; it has to be actionable and easily understandable.

One of the drawbacks is that there is no readily available short monograph for P & T committee review. So that is what we have to do as plan administratorswe put together a summarized version. Many different types of information must be looked at and condensed, so there can be a presentation about a drug in 5-15 minutes to support the committee discussions. To put together the custom monograph, different sources are examined. One is the Academy of Managed Care Pharmacy (AMCP) dossier. It is a very good template and has many of the specific pieces of information needed in a P&T monograph. One of those highlighted pieces of information is the pharmacoeconomics outcome studies that exist for the drug that is under review; it also has the FDA registration studies. This actually works very well because there is no need to go out and find these studies on our own. The information pulled for the internal monograph is chosen based on what makes sense relevant in the practices that exist. In addition, information from the pharmacy benefits manager is also obtained that show such things as number of members taking the drug, growth rate, etc.

Pharmacy Benefit Managers (PBM's) are large corporations; Medco, Express- Scripts, and Caremark-CVS are well known examples in the US. These companies manage pharmacy benefits for many of the employers out there who may not have a pharmacist, or who may not have a pharmacy staff to do that. Employers can go out and purchase pharmacy benefits and let the PBM's manage it for them. Because a PBM is required to process, claims, most health plans are not large enough to adjudicate their own claims and the PBM's system spans the entire United States. They are used as an information source as the monographs are put together. There is a wait time of about six months before new drugs are actually reviewed based on when a drug hits the market and data become available on how the drug is used, what utilization patterns are, if the drug is actually going to be a drug that is used frequently, or is it a drug that is going to be used very little because maybe there are better drugs on the market.

There are a variety of different sized health care plans; a very large plan has a staff that can do this preparation work. Small health plans (<2.5 million lives) do not have large staffs to do this work. The staff at the health plan has to become a jack of all trades, where they can do monographs, patient reviews, etc. Consequently, this is not a highly sophisticated process in a small health plan environment.

The PBM monograph is commonly used mostly because it is a little bit shorter than the AMCP monograph; it can run into hundreds of pages, as the PBM monograph runs maybe 15 or 20 pages and can be shortened even further. As a committee, the most important things to review are safety, efficacy, and cost. One of the changes in the last couple of years is a concentration on differential efficacy. Drugs are not only looked at to see if they work, but also how this drug works in relation to other drugs on the market, hence the pharmacoeconomics input, which is what is of interest. In addition, it also needs to be determined if the drug is equivalent to a drug that is already on the market. Does the drug under review have any other advantage; a better costing drug, better safety profile, etc? Many of the P & T committees have started a process over the last couple of years of having one of the physicians sitting on the committee, prescribe this drug, and give the review to give some real world examples of how they are using it. This helps the committee get a better understanding of how the drug is actually going to be used in the real world.

It is interesting to point out that the Centers for Medicare and Medicaid (CMS) who actually pay for Medicare in the United States, have what they call five classes of concern, in which they require that all of the drugs in a class be on the formulary or substantially all of the drugs in a class be on a formulary. They have interpreted that as all of the drugs in the class have to be on the formulary. It makes it rather hard to do a differential efficacy review if all of those drugs in a particular class are included. There are also key drug type requirements. Basically all drugs can be broken down into about 120 different categories called Key Drug Types. CMS then has mandated that you have to have at least two drugs in each category on your formulary.

One of the other things the committee does, once the review is complete, is to make one of three different choices. They can either say, 'we must add the drug', 'we may add the drug', or 'we must not add the drug'. 'Must add' means the drug is clearly superior than anything else that is out there and must be on the formulary; 'May add' means the drug is therapeutically equivalent, it may have a little bit better side affect profile, but the final patient outcome is about the same; and 'Must not add' are drugs that the committee has looked at and said, and these are definitely not wanted on the formulary. In addition, the P & T committee looks at are whether or not to put prior authorization on a drug, quantity limits, or any other type of utilization management on a drug.

One of the things, in particular, with a U.S. type of arrangement, is that formulary positioning of a drug can be highly variable between plans. While every plan has their own P & T committee, they are all very different; every physician has a different viewpoint on how the drug is actually used, and how it is going to be used in therapy. This intra-physician difference influences how drugs are actually placed on formularies. The other thing you will find is that formularies do have a very small amount of marketing in them; patients have the ability to choose the health plan that they receive their insurance from. Because they can choose us or they can choose someone else, one of the things they look at is to see whether the drug is on the formulary. Therefore one has to balance a formulary for safety, efficacy and cost; one also has to balance it for marketability. Committees do not want to add high cost drugs on a formulary that may attract members with a particular disease state if the plan doesn't have a disease management program for that condition. Plans also do not want to put every drug in the universe on as well which may have the effect of attracting people who may be harder for the plan to manage. The goal is to be able to find patients who can be managed effectively, efficiently, and to allow the health plan to manage their health status as best as possible.

The other is member choice. In the U.S., there is a desire to have many choices; there is no desire to have any restrictions in any way, even to the detriment of us sometimes. There need to be formularies that give choice, but also balances all the marketing, safety, efficacy, pieces as well.

  Issues Index | 2008 Issues Index  

Contact ISPOR @  |  View Legal Disclaimer
©2016 International Society for Pharmacoeconomics and Outcomes Research. All rights reserved under International and Pan-American Copyright Conventions. 
Website design by Eagle Systems USA, Inc.