When it comes to assessing the clinical benefits of a drug and deciding on which tier that drug is placed, the conversation traditionally begins and ends with a plan's Pharmacy and Therapeutics Committee. However, now that Premera Blue Cross in Washington has seen its value-based formulary implemented by a couple of large, healthcare-related employers in the Puget Sound area, a new avenue of cost savings may exist for insurers wanting more bang for their drug-purchasing buck.
And the cost savings are, apparently, real: In mid-2010, Premera Blue Cross, which manages its own formulary design, launched a pilot program on the 8,000-plus self-insured lives of its own Premera Associates Group. Members were informed of a new tier to go with its other three drug tiers, and it was this ?preventive tier? that offered ?high-value? drugs to treat chronic conditions, such as diabetes, with zero copay. In the first year, the MCO saw per-member, per-month savings of 10 percent, with a 12 percent overall cost shift to members and no reduction of adherence to the recognized high-value drugs.
While the idea of scoring a drug based on expected value might sound like a shot in the dark, Premera has devised what it believes is a ?can?t miss? equation: First it calculates the drug's value by figuring out the ratio of its comparative clinical effectiveness to its cost. That figure is then compared to the known standard of care, whether that is some ?gold standard? type of drug or the most effective supportive care currently in existence. Other, more subjective factors, such as public health and ethical issues, are then taken into consideration.
The drug is then placed in one of four tiers based on its value. Tier 1 is for ?highly cost-effective? drugs, Tier 2 is for merely ?cost effective? drugs, Tier 3 for ?somewhat cost-effective? drugs and Tier 4 for ?minimally cost-effective drugs.? Representatives have said that Tier 4 is reserved for those drugs for which either the clinical outcome is found lacking or there exist safety concerns.
?The process ends up creating a scenario where you?re able to offer lower copays for the higher value drugs,? said Eric Earling, a Premera Blue Cross spokesperson. ?We try to keep the process as transparent as we can. One thing that's been especially helpful is the interest we?ve seen, and the value-based formulary has produced the opportunity to work with pharmaceutical companies in new and different ways.?
It's worth noting that, should the P&T Committee advise against adding a drug to the formulary, the drug doesn?t make it to the VAC Committee. The two committees act independently, both of Premera and of one another. While the P&T Committee is made up of seven physicians, three pharmacists and a pharmacy benefits manager, the VAC Committee includes four health economists with the University of Washington, an oncologist and a bioethicist.
It's also worth noting that Premera wasn?t the first to assess drugs on its formulary based on cost-effectiveness. It wasn?t even the first MCO to create a VAC Committee. ExpressScripts, which handles Premera's pharmacy benefits (retail, mail order, and specialty) and claims administration, inherited a VAC Committee when it acquired WellPoint's NextRx subsidiary in late 2009. But the ExpressScripts VAC committee included ExpressScripts employees and had a smaller role in drug tiering.
Earling said that, while Premera is making its value-based formulary available to two large, healthcare-related employer groups in the Seattle region, the insurer does not expect the concept to work for every group.
?Our new clients obviously signed up because they fit the profile of a good fit for the [formulary] and had the opportunity to see how it worked for us as an employer before moving forward,? he said. ?Because the savings aren?t going to be visible up front, you?re going to want an employer group that's more sophisticated and engaged in the population health side of things. It's a customer-by-customer conversation.?