Design, Implementation, and First-Year Outcomes of a Value-Based Drug Formulary

AUTHORS: Sean D. Sullivan, Kai Yeung, Carol Vogeler, Scott D. Ramsey, Edward Wong, Chad O. Murphy, Dan Danielson, David L. Veenstra, Louis P. Garrison, Wylie Burke, John B. Watkins



BACKGROUND: Value-based insurance design attempts to align drug copayment tier with value rather than cost. Previous implementations of value-based insurance design have lowered copayments for drugs indicated for select “high value” conditions and have found modest improvements in medication adherence. However, these implementations have generally not resulted in cost savings to the health plan, suggesting a need for increased copayments for “low value” drugs. Further, previous implementations have assigned equal copayment reductions to all drugs within a therapeutic area without assessing the value of individual drugs. Aligning the individual drug’s copayment to its specific value may yield greater clinical and economic benefits. In 2010, Premera Blue Cross, a large not-for-profit health plan in the Pacific Northwest, implemented a value-based drug formulary (VBF) that explicitly uses cost-effectiveness analyses after safety and efficacy reviews to estimate the value of each individual drug. Concurrently, Premera increased copayments for existing tiers.

OBJECTIVE: To describe and evaluate the design, implementation, and first-year outcomes of the VBF.

METHODS: We compared observed pharmacy cost per member per month in the year following the VBF implementation with 2 comparator groups:
(1) observed pharmacy costs in the year prior to implementation, and (2)
expected costs if no changes were made to the pharmacy benefits. Expected costs were generated by applying autoregressive integrated moving averages to pharmacy costs over the previous 36 months. We used an interrupted time series analysis to assess drug use and adherence among individuals with diabetes, hypertension, or dyslipidemia compared with a group of members in plans that did not implement a VBF. 

RESULTS: Pharmacy costs decreased by 3% compared with the 12 months prior and 11% compared with expected costs. There was no significant decline in medication use or adherence to treatments for patients with diabetes, hypertension, or dyslipidemia.

CONCLUSIONS: The VBF and copayment changes enabled pharmacy plan cost savings without negatively affecting utilization in key disease states.

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