Formulary Design Research Articles

Estimating price elasticities of demand for pain relief drugs: evidence from Medicare Part D.

Overdose deaths from prescription opioids remain elevated, and policymakers seek solutions to curb opioid misuse. Recent proposals call for price-based solutions, such as opioid taxes and removal of opioids from insurance formularies. However, there is limited evidence on how opioid consumption responds to price stimuli. This study addresses that gap by estimating the effects of prices on the utilization of opioids, as well as other prescription painkillers. I use nationally representative individual-level data on prescription drug purchases and exploit the introduction of Medicare Part D in 2006 as an exogenous change in out-of-pocket drug prices. I find that new users have a relatively high price elasticity of demand for prescription opioids, and that consumers treat over-the-counter painkillers as substitutes for prescription painkillers. My results suggest that increasing out-of-pocket prices of opioids, through formulary design or taxes, may be effective in reducing new opioid use.

HPR151 The Effect of the Inflation Reduction Act (IRA) on Benefit and Formulary Design, Including Drug Coverage and Selection, for Medicare D and Commercial Patients in the United States

HPR151 The Effect of the Inflation Reduction Act (IRA) on Benefit and Formulary Design, Including Drug Coverage and Selection, for Medicare D and Commercial Patients in the United States

Designing a Value-Based Formulary for a Commercial Health Plan: A Simulated Case Study of Diabetes Medications

ObjectivesThe healthcare expenditure for managing diabetes with glucose-lowering medications has been substantial in the United States. We simulated a novel, value-based formulary (VBF) design for a commercial health plan and modeled possible changes in spending and utilization of antidiabetic agents. MethodsWe designed a 4-tier VBF with exclusions in consultation with health plan stakeholders. The formulary information included covered drugs, tiers, thresholds, and cost sharing amounts. The value of 22 diabetes mellitus drugs was determined primarily in terms of incremental cost-effectiveness ratios. Using pharmacy claims database (2019-2020), we identified 40 150 beneficiaries who were on the included diabetes mellitus medicines. We simulated future health plan spending and out-of-pocket costs with 3 VBF designs, using published own price elasticity estimates. ResultsThe average age of the cohort is 55 years (51% female). Compared with the current formulary, the proposed VBF design with exclusions is estimated to reduce total annual health plan spending by 33.2% (current: $33 956 211; VBF: $22 682 576), saving $281 in annual spending per member (current: $846; VBF: $565) and $100 in annual out-of-pocket spending per member (current: $119; VBF: $19). Implementing the full VBF with new cost shares, along with exclusions, has the potential to achieve the greatest savings, compared with the 2 intermediate VBF designs (ie, VBF with prior cost sharing and VBF without exclusions). Sensitivity analyses using various price elasticity values showed declines in all spending outcomes. ConclusionDesigning a VBF with exclusions in a US employer–based health plan has the potential to reduce health plan and patient spending.

Medicare Advantage coverage restrictions for the costliest physician-administered drugs.

To examine the use of step therapy, prior authorization, and Part D formulary exclusion by 4 large Medicare Advantage (MA) insurers to manage 20 physician-administered drugs with the highest total Medicare expenditures (top 20 drugs). We collected data for United Healthcare, CVS/Aetna, Humana, and Kaiser plans to create a database of 2020 Part B coverage restrictions and conducted a retrospective analysis of 2018-2020 Part D formularies. For each insurer, we calculated the number of top 20 physician-administered drugs subject to prior authorization and step therapy. For physician-administered drugs for which there were no similar or interchangeable alternatives, we examined which insurers required prior authorization or step therapy. Finally, we examined whether insurers restricted access to physician-administered drugs by reducing coverage on Part D formularies. Of the top 20 physician-administered drugs, 17 were subject to prior authorization and 10 were subject to step therapy by at least 1 insurer. For 5 physician-administered drugs without a similar or interchangeable alternative, none were subject to step therapy and all were subject to prior authorization by at least 1 insurer. Across the 4 insurers, 16 physician-administered drugs were covered on all or some of the Part D formularies in 2018, which decreased to 6 in 2020. Four large MA insurers managed access to expensive physician-administered drugs with a combination of prior authorization, step therapy, and Part D formulary design. When a low-cost alternative exists, these tools can help reduce wasteful spending, but the administrative barriers may also reduce access.

P72 Designing a Value-Based Formulary for Kaiser Permanente Washington: A Hypothetical Case Study of Diabetes Mellitus Medications

Value-based formulary (VBF) design sets lower copayments for pharmaceuticals with a high assessed value and higher copayments for drugs with a low assessed value. Previous VBFs focused on reducing cost-sharing without matching each drug's copayment to its assessed value. Our aim is to outline a novel VBF design for Kaiser Permanente Washington (KPWA) beneficiaries and estimate possible spending changes.

HPR38 Drug Spending and Medication Use after Implementing a Formulary That Incorporates Formal Value Assessment

To address prescription drug affordability, the National Academy of Medicine called for formularies that are informed by a drug’s assessed value and that allow for the selective exclusion of drugs from coverage. A non-profit health plan implemented a “Value-Based Formulary-essentials” (VBF-e) program that applied a threshold of $150,000 per quality adjusted life-year to inform cost-sharing levels and exclusion. Estimates of the impact of the VBF-e on drug spending could inform future value-based formulary design.

Coverage of New Drugs in Medicare Part D.

Medicare Part D is an outpatient prescription drug benefit for older Americans covering more than 46 million beneficiaries. Except for mandatory coverage for essentially all drugs in six protected classes, plans have substantial flexibility in how they design their formularies: which drugs are covered, which drugs are subject to restrictions, and what factors determine formulary placement. Our objective in this paper was to document the extent to which Part D plans limit coverage of newly approved drugs. We examined the formulary design of 4,582 Part D plans from 2014 through 2018 and measured (1) the decision to cover newly approved drugs in nonprotected classes, (2) use of utilization management tools in protected and nonprotected classes, and (3) the association between plan design and drug-level characteristics such as 30-day cost, therapeutic benefit, and the US Food and Drug Administration (FDA) expedited regulatory pathway. The FDA approved 109 new drugs predominantly used in outpatient settings between 2013 and 2017. Of these, 75 fell outside of the six protected drug classes. One-fifth of drugs in nonprotected classes (15 out of 75) were covered by more than half of plans during the first year after approval. Coverage was often conditional on utilization management strategies in both protected and nonprotected classes: only seven drugs (6%) were covered without prior authorization requirements in more than half of plans. Higher 30-day drug costs were associated with more widespread coverage in nonprotected classes: drugs that cost less than $150 for a 30-day course were covered by fewer than 20% of plans while those that cost more than $30,000 per 30 days were covered by more than 50% of plans. Plans were also more likely to implement utilization management tools on high-cost drugs in both protected and nonprotected classes. A higher proportion of plans implemented utilization management strategies on covered drugs with first-in-class status than drugs that were not first in class. Other drug characteristics, including availability of added therapeutic benefit and inclusion in FDA expedited regulatory approval, were not consistently associated with plan coverage or formulary restrictions. Newly approved drugs are frequently subject to formulary exclusions and restrictions in Medicare Part D. Ensuring that formulary design in Part D is linked closely to the therapeutic value of newly approved drugs would improve patients' welfare.

With New Authority, Agency Empowered to Crack Down on MH Parity Enforcement

With New Authority, Agency Empowered to Crack Down on MH Parity Enforcement

PMU66 US Payer Decision Making Priorities: A Cohort Analysis across Eight Disease Categories

The objective for this research is to evaluate and segment US payer evidence review, formulary design, and contracting priorities across 8 disease categories (RA, diabetes, heart failure, migraine, breast cancer, prostate cancer, AML, PAH). Senior-level decision-makers (n=10) from US payer organizations (n=9) representing 206.1 million member lives were recruited in May 2020 to participate in a web survey (30 topics). Advisers were required to have a high level of knowledge surrounding formulary decision-making, clinical pathways and medical policy development, and manufacturer contracting. A total of 11 topical areas (46 suptopics) were explored. Descriptive statistics (e.g. Surveymonkey ranking scores, weighted means, % of mentions) and contextual analysis were used to analyze the results. Subanalyses were conducted by payer archetype. Efficacy and safety were consistently ranked as top priority, while PROs and economic drivers were consistently ranked as low priority. Direct costs and HCRU were consistently ranked as the most important burden of disease contributors across all therapy areas. Top economic value markers include: pharmacy costs, hospital admissions/re-admissions, and surgical costs. Cost effectiveness analysis was ranked the most important economic evaluation metric across all therapy areas. Value perception of humanistic outcomes varied, depending on disease area; QoL metrics were more important in oncology and migraine than in other areas. Novel MOA as a potential differentiator was consistently not viewed as a high impact product attribute. About half of payers across all disease areas conduct regular monitoring for non-response and non-adherence to therapy. Innovative pricing and contracting approaches related to disease categories were of moderate interest to payers. As US payers are presented with more in-depth, relevant evidence by payers across many disease categories, it is critical for manufacturers to tailor their evidence approaches and focus on nuances in particular disease areas and the unique needs of both individual payers and payer archetypes.

Underestimating the Value of an Intervention: The Case for Including Productivity in Value Assessments and Formulary Design.

Value assessment reports are increasingly being considered in health care coverage decisions. The inputs included and analytic methodologies underlying these reports should include all components of value. To determine whether and how productivity was included in a value assessment, compare the incremental cost per quality-adjusted life-year (cost/QALY) estimates with and without productivity, assess if inclusion of productivity changed the value category and estimate the direction and magnitude of change. We reviewed pharmaceutical value assessment reports published between March 2017 and July 2019 by the Institute for Clinical and Economic Review (ICER) to determine whether productivity was included and how it was reported (i.e., co-base case or scenario analysis). Within each report, we identified unique treatment comparisons for which modelers estimated an incremental cost/QALY. We categorized the incremental cost/QALY estimates using ICER's willingness-to-pay (WTP) categories and assessed if inclusion of productivity changed the value category (i.e., < $50,000/QALY). For reports that included 2 numerical estimates, we assessed the direction and magnitude of change when productivity was included. Of the 19 reports that evaluated pharmaceutical treatments, 18 (94.7%) included productivity. Two reports (11.1%) incorporated productivity in a co-base case analysis, and 16 included productivity in a scenario analysis. Across these 18 reports, there were 75 unique comparisons of pharmaceutical interventions. Across the 75 comparisons, 4 (5.3%), 3 (4.0%), 8 (10.6%), and 1 (1.3%) of the coverage decisions would change at the $50,000/QALY, $100,000/QALY, $150,000/QALY, and $500,000/QALY threshold, respectively. Sixty comparisons included 2 numerical cost/QALY estimates. The magnitude of change in the cost/QALY, after including productivity, ranged from -80.1% to 6.8%. The estimated value increased for 54 (72%), decreased for 5 (6.6%), and did not change for 1 (1.7%) of the comparisons. Value assessment should capture the range of costs and benefits of an intervention. The exclusion of productivity costs can alter, often underestimating, the assessment of value. This may affect coverage decisions-inclusion or exclusion from the insurance benefit-based on these assessments. Value assessment reports intended to be used for health care decision making should include productivity and elevate its visibility by using base-case analyses rather than scenario analyses. This study was funded by the National Pharmaceutical Council. Karmarkar is currently a postdoctoral fellow at the National Pharmaceutical Council. Graff and Westrich are employees of the National Pharmaceutical Council, which provides unrestricted research grants to value assessment bodies including ICER and IVI.

Association of Formulary Exclusions and Restrictions for Opioid Alternatives With Opioid Prescribing Among Medicare Beneficiaries

Although there are many pharmacologic alternatives to opioids, it is unclear whether the structure of Medicare Part D formularies discourages use of the alternatives. To quantify the coverage of opioid alternatives and prevalence of prior authorization, step therapy, quantity limits, and tier placement for these drugs, and test whether these formulary exclusions and restrictions are associated with increased opioid prescribing to older adults at the county level. County fixed-effect models were estimated using a panel of counties across the 50 US states and the District of Columbia over calendar years 2015 and 2016. Data analysis was conducted from July 1 to September 23, 2019. The sample included 2721 counties in 2015 and 2671 counties in 2016 with sufficient data on Medicare Part D formulary design and opioid prescribing. County-level opioid prescribing rate (number of opioid claims divided by the number of overall claims) and counts of excluded opioid alternatives and opioid alternatives with prior authorization, step therapy, quantity limits, and high-tier placements. A total of 30 nonopioid analgesics were examined across 28 997 Medicare plans in 2015 and 30 390 plans in 2016. Medicare plans did not cover a mean of 7% of these drugs (interquartile range, 10%; lower to upper limit, 0%-23%). Among covered nonopioids, prior authorization and step therapy were uncommon, with fewer than 5% affected by prior authorization and 0% by step therapy. However, 13% of covered nonopioids had quantity limits (interquartile range, 10%; lower to upper limit, 0%-31%) and 22% were in high-cost tiers (interquartile range, 38%; lower to upper limit, 0%-50%). Increases in the number of nonopioids excluded on Medicare plans in a county were associated with increased opioid prescribing (effect size relative to mean, 2.2%-3.7%; P = .004). Conversely, increases in the number of opioids not covered on Medicare plans in a county was found to be associated with decreased opioid prescribing (effect size relative to mean, 0.8%-1.5%; P = .02). None of the utilization management strategies (prior authorization, step therapy, and quantity limits) examined or high-cost tier placements of nonopioids were associated with increased opioid prescribing. Lack of Medicare coverage for pharmacologic alternatives to opioids may be associated with increased opioid prescribing.

Health Insurance, Price Changes, and the Demand for Pain Relief Drugs: Evidence from Medicare Part D

Overdose deaths from prescription opioids are on the rise, and policymakers seek solutions to curb opioid misuse. Recent proposals call for price-based solutions, such as opioid taxes and removal of opioids from insurance formularies. However, there is limited evidence on how opioid consumption responds to price stimuli. This study addresses that gap by estimating the effects of prices on the utilization of opioids as well as other prescription painkillers. I use nationally representative individual-level data on prescription drug purchases to exploit the introduction of Medicare Part D in 2006 as an exogenous change in out-of-pocket drug prices. I find that new users have a relatively high price elasticity of demand for prescription opioids, and that consumers treat over-the-counter painkillers as substitutes for prescription painkillers. My results suggest that increasing out-of-pocket prices of opioids, through formulary design or taxes, may be effective in reducing new opioid use.

Are Medicaid Closed Formularies Unethical?

State Medicaid programs have proposed closed formularies to limit spending on drugs. Closed formularies can be justified when they enable spending on other socially valuable aims. However, it is still necessary to justify guidelines informing formulary design, which can be done through a process of decision making that includes the public. This article examines criticisms that Medicaid closed formularies limit deliberation about decisions that affect drug access and unfairly disadvantage poor patients. Although unfairness to poor patients is a risk, it is not a problem unique to Medicaid, since private insurance programs have also implemented closed formularies.

Value-Based Insurance Design: Current Evidence and Future Directions.

Value-based insurance design (VBID) is an approach to designing insurance to align the use of health care services with some notion of value. While there is substantial federal interest in VBID and a growing body of evidence of its effects among populations covered by employer-sponsored plans, much of the focus has been on VBIDs that solely reduce cost sharing for certain treatments. The minority of VBIDs that have identified and increased cost sharing for low-value treatments have produced some promising results. Looking to the future, health plans should continue to develop and benefit from innovations in formulary design and health information technology that distinguishes and incentivizes high-value drugs in a patient-specific manner. DISCLOSURES: No funding contributed to the writing of this article. The author has nothing to disclose.

Psoriasis treatment patterns: a retrospective claims study

Objective: The objective was to characterize psoriasis treatment patterns, including estimating persistence and describing subsequent events (i.e. switching and restarting) for all systemic therapies.Methods: This retrospective cohort study utilized Truven MarketScan databases from 1 January 2014 to 31 December 2016 to investigate persistence, switching and restarting in new users of systemic psoriasis medications. Descriptive statistics, time-to-event analyses and a Cox proportional hazards regression were conducted.Results: A total of 5205 patients met inclusion criteria. Regardless of treatment type, >50% lost persistence by 12 months. Patients newly initiating acitretin or non-TNF biologic experienced the highest loss of persistence (85.2%, 73.8%, respectively). Patients initiating a TNF-α inhibitor or apremilast experienced the lowest loss (51.8%, 56.4% respectively). Treatment type had a statistically significant effect on persistence loss (adjusted hazard ratio: 0.86, 95% CI: 0.81, 0.91). Restarting was the most commonly observed event for patients on an oral or biologic (60.2%, 79.9%, respectively). The most common switch from an oral was to a TNF-α inhibitor, while apremilast often followed biologics.Conclusion: Most patients lost persistence on initial treatment by 12 months, and the majority restarted treatment. This may indicate poor compliance or the cyclical nature of psoriasis. More patients switched from an oral to biologic than vice versa, likely due to formulary design and preference for orals. Studies are needed to investigate underlying reasons and patient characteristics that differentiate treatment utilization.

Partnering with the Department of Insurance: Coordinating a clinical and regulatory review of formulary benefit designs.

This case report summarizes a partnership between Butler University College of Pharmacy and Health Sciences and the Indiana Department of Insurance. The report outlines the review of qualified health plans sold on the marketplace. Details are provided on how the College responded to requests by the department to provide a more comprehensive review of marketplace formularies. This included the development of clinical appropriateness tools for multiple disease states. The aim of this partnership was to improve prescription coverage for Indiana residents and address formulary design discrimination.

MH Parity Remains Elusive as States Fail to Enforce Law

MH Parity Remains Elusive as States Fail to Enforce Law

A Health Plan's Formulary Led To Reduced Use Of Extended-Release Opioids But Did Not Lower Overall Opioid Use.

Many insurers are using formulary design to influence opioid prescribing, but it is unclear if these changes lead to reduced use or just substitution between opioids. We evaluated the effect of a new prior authorization process implemented in July2015 for extended-release (ER) oxycodone by Blue Shield of California. Compared to other commercially insured Californians, among 880,000 Blue Shield enrollees, there was a 36percent drop in monthly rates of ER opioid initiation relative to control-group members, driven entirely by decreases in ER oxycodone initiation and without any substitution toward other ER opioids. This reduction was offset by a 1.4percent relative increase in the rate of short-acting opioid fills. There was no significant change in the overall use of any opioids prescribed, measured as morphine milligram equivalents. This suggests that though insurers can play a meaningful role in reducing the prescribing of high-risk ER opioids, a formulary change focused on ER opioids alone is insufficient to decrease total opioid prescribing.

Data Linkages to Study Pharmaceutical Health Services Delivery: Three Applied Examples

IntroductionThe safe, effective, and efficient use of pharmaceutical health services is a critical area of public health and social policy. Implementation and monitoring studies often use single data sources but require diverse data elements pertaining to patients and health services. Linking multiple data sources may enable more comprehensive studies.&#x0D; Objectives and ApproachThe objective of this presentation is to describe three applied pharmaceutical health services projects in the United States that use data linkage to support program monitoring. A conceptual model was defined including the following key domains: (1) contextual determinants; (2) pharmacy service availability and coverage by payers; (3) receipt/use of services by patients; and (4) outcomes such as clinical outcomes, patient satisfaction and healthcare costs. Applied studies were selected to illustrate data linkage across different domains. For each study, we present the data sources used and the domains addressed by each data source. We also describe the linkage process.&#x0D; ResultsStudy 1 assesses distance between patients and pharmacies in-network for health plans. It determined pharmacy address and patient ZIP code using several Medicare datasets and calculated driving distance using geocoding software.&#x0D; Study 2 measures if patients targeted for services receive an intervention designed to prevent adverse drug events and improve patient health outcomes while reducing healthcare costs. Targeted beneficiaries are determined using Medicare administrative data and delivery of services is assessed based on a custom-developed encounter data set, linked by beneficiary.&#x0D; Study 3 examines the association between prescription drug formulary design, medication use, and cost and health outcomes. For this, formulary data are obtained from a commercial source and utilization/outcomes data from commercial claims data. These datasets are linked by payer.&#x0D; Conclusion/ImplicationsMany data sources are available for pharmaceutical health services research studies and linkage can be made at the patient, region, or payer level to support program monitoring and evaluation. Data linkage enables the inclusion of multiple domains, although multiple linkages and/or custom data may be needed for more complex studies.

Five States Pass Laws to Improve Compliance With MH Parity Laws

Five States Pass Laws to Improve Compliance With MH Parity Laws