U.S. Sponsors Of Health Insurance Lack Evidence-Based Transparency In Formulary Decisions

U.S. Sponsors Of Health Insurance Lack Evidence-Based Transparency In Formulary Decisions

U.S. sponsors of health insurance lack evidence-based transparency in regard to providing reasons for their formulary decisions.

A recently published article indicates that there’s been slow uptake by sponsors of health insurance – self-funded employer groups and health plans – of a CVS Caremark formulary option, which is based on an Institute for Clinical and Economic Review (ICER) cost-effectiveness assessment of therapeutic classes with multiple competitors.

Prior to releasing this option, CVS Caremark had said that the formulary option would allow its clients – sponsors of health insurance, such as employers and health plans – to choose to exclude drugs from their tailored formularies that don’t meet a benchmark of $100,000 per quality-adjusted life year (QALY). Ostensibly, this was done to put pressure on prices of drugs in therapeutic classes with multiple competitors.

But, the option has seen few takers. Interestingly, no reasons have been given for the poor uptake. So, analysts have been left to speculate. Certainly, the use of ICER analyses and cost-effectiveness thresholds has drawn fierce criticism from patient advocacy groups. As a consequence, perhaps employers and health plans are balking at the explicit use of cost-effectiveness thresholds. Or, maybe it has to do with the fact that the CVS formulary option was not widely advertised.

Whatever one’s view is on ICER and cost-effectiveness thresholds as limits to access an ICER analysis indicating that a drug does not meet a cost per QALY benchmark provides a rationale for why certain products aren’t covered. Here, the ICER methodology, its arbitrarily chosen threshold, and even the QALY itself are subject to debate.

It may indeed be the case that cost per QALY thresholds have unintended negative consequences for patients that make sponsors of health insurance squeamish about adopting them. But, at least a debate can be had, because there’s something quantifiable, falsifiable, and relatively transparent to discuss.  

Not referencing ICER specifically, a few sponsors have explicitly said they don’t want to limit employee choices by adopting cost-effectiveness thresholds. But, at the same time they do limit choices. The open formulary is a bygone. For decades, formulary restrictions have been on the rise, mostly in the form of rising co-payments and more use of conditions of reimbursement, such as prior authorization, step therapy, quantity limits, and indication restrictions.

What’s problematic about limits on choices and conditions of reimbursement is not their existence per sé, but the fact that sponsors of health coverage and health plans often do not provide evidence-based reasons for decisions.

At present, most formularies in the U.S. lack full transparency in terms of quantifiable and falsifiable reasoning for positioning of products on formulary. In most instances, the beneficiary does not know why a product is off formulary, or in a particular tier, or if its clinical effectiveness numbers are equal to or better than products that are on formulary.

There are exceptions to the rule, as a small number of U.S. health plans have adopted value-based formularies. Conspicuously, in 2010, Premera Blue Cross in Washington State developed a “value-based formulary” with tiers based upon incremental cost–effectiveness ratios. The tiers are associated with increasing patient co-payments, with high value preventive drugs having very low or no co-payments. But, Premera’s example has not been followed by many.

Evidently, some of the same employers and health plans who won’t adopt the CVS formulary option based on ICER evidence are showing increased concern about the cost of certain newly approved high-priced drugs or therapies, and are considering to “refuse to pay for them [high-priced drugs or therapies] no matter what their comparative effectiveness.”

Surely, the latter statement is alarming in its brazen resistance to being evidence-based. It’s perfectly reasonable for an employer or health plan to decide against using a CVS formulary option for its enrollees because of what it deems is an arbitrary cost-effectiveness threshold. But, it’s entirely unreasonable and inconsistent for an employer or health plan to then say it will refuse to pay for a new high-priced drug or therapy no matter what its comparative effectiveness. In fact, one could say that the latter is the worst kind of rationing as it completely ignores evidence.

Offering no clear reason for formulary choices, or why a purportedly value-based formulary option is not being adopted is not evidence-based. Nor is it evidence-based to give an absolute “no” to high-priced therapies in spite of their comparative effectiveness.

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