A Predictive Cost Analysis Model for Estimating Formulary Impact of New Products in Managed Care

Abstract

Competition among new pharmaceutical products for unrestricted formulary inclusion continues to dominate the concerns of managed care decision makers. These competitive pressures may originate when a formulary appears to be overcrowded and underfunded based on what it is expected to deliver-primarily financial management of an ever-increasing list of new products in addition to day-to-day pharmaceutical needs. For those managers facing the daunting task of improving quality of pharmaceutical care with finite resources, appropriate product selection has become a dual consideration involving assessment of the new product's competitive clinical features and benefits, in tandem with an assessment of its formulary cost impact. We present a simple and objective financial model that, based on historical utilization data, will help predict a priori an accurate estimate of the cost impact of a new product. We illustrate our financial model with a new calcium antagonist (CA), T-Block. T-Block is the first of a new generation of nondihydropyridine, T-channel selective CAs entering a crowded therapeutic area for the treatment of hypertension and angina pectoris. This model compares the weighted average cost-per-prescription for CAs before and after the formulary inclusion of T-Block. Three key variables of the model-utilization ratios of available strengths, market share for the new product, and annual CA prescription volume-facilitate preparation of customized financial analyses. Accordingly, the model's simple three-way sensitivity analysis defines specific financial scenarios under various conditions of uncertainty. The model also can be used as a post-formulary utilization management and market share tracking tool.