ORGANIZATION: Premera Blue Cross PROBLEM OR ISSUE ADDRESSED: Traditional U.S. payer drug selection processes are based on safety, efficacy and drug cost. As premiums continue to rise, many plan sponsors have responded by raising member cost shares on biologics and other high cost pharmaceuticals. This creates affordability barriers for these drugs, regardless of their clinical value, comparative effectiveness or cost-effectiveness. GOALS: Our novel cost-effectiveness driven formulary design seeks to offset the negative impact of such policies on clinical outcomes and quality of care by assigning the drugs that are the most incrementally cost-effective to the lowest formulary tiers. OUTCOMES ITEMS USED IN THE DECISION: Comparative effectiveness and safety (clinical benefits and harms as determined by our existing formulary process) and incremental cost-effectiveness ratios of specific therapies vs. usual care alternatives, based on published cost-effectiveness analyses, manufacturer-submitted cost-effectiveness models and in some cases, models developed internally by plan staff. Cost-effectiveness studies are subjected to a quality review process before being presented to the formulary committee. IMPLEMENTATION STRATEGY: Premera Blue Cross has created a formulary process that assigns each drug to one of four tiers based on a set of flexible cost-effectiveness thresholds. Incremental cost-effectiveness, assessed as rigorously as possible, provides a scientific, transparent and defensible means of maintaining lower cost shares for the highest value drugs, regardless of actual prescription cost. In some cases, a drug may fall in more than one tier, based on the patient population and the particular indication for which it is being used. This presentation describes Premera’s formulary process, how the thresholds for each tier were established and how drugs and therapeutic classes are reviewed by an external multidisciplinary expert committee, with specific therapeutic drug class outcome examples. This formulary is being offered as part of a new pharmacy benefit product addressing a currently unmet market need. RESULTS: Premera’s new formulary process was developed in 2009. This presentation describes the methods used to establish incremental cost-effectiveness thresholds for each formulary tier and the constitution of an external multidisciplinary expert committee to assign specific drugs to tiers. The rationale and tier assignments for specific therapeutic drug classes are presented as examples. LESSONS LEARNED: Despite limitations to the current availability of clinical and economic outcomes from well-designed studies on which to base tiering decisions, it is possible to implement a credible process based on incremental cost-effectiveness analysis. Initial responses suggest that manufacturers will accept the challenge to improve the quality of available evidence to support future decisions.