A little discussed topic in the pharmaceutical policy and pricing debate

Have you ever taken your medication? Have you had to change a medication due to changes in your drug formula? It's likely that you or a family member would answer “yes” to both questions. Drug benefits are the most commonly used part of health insurance in the United States. In 2023, more than 60% of people were taking at least one medication, and 37% were taking three or more.¹ This means that most Americans with health insurance must interact with a medication prescription.

This was not always the case. It wasn't until the 1970s that health insurance began to cover medications. Previously, if a person needed a prescription, they had to pay the full price out of pocket. As more and more medications came onto the market, it became clear that there was a need for both patients and insurance organizations to provide financial protection for medications. This led to the creation of the Pharmacy Benefit Manager (PBM) in the 1990s. The role of the PBM was to act as an intermediary with the pharmaceutical manufacturers. This made it possible to reduce the unit price of medicines through bulk purchasing. In addition to cost reduction measures, PBMs created the drug list or formulary that was used as part of the drug benefit.

Recently, PBMs have come under increasing scrutiny. Two areas that have received significant attention are the impact of PBMs on drug prices and the lack of transparency in their business practices. One problem that has not received much attention is the misuse of the drug formulary – the basis of the drug benefit – which consists of a list of medications covered by health insurance. Although some would say that the purpose of drug formulations has remained the same over the past 30+ years, others would disagree. Originally, drug formularies were developed by a pharmacy and therapeutics committee of a PBM, health plan, or other organization. The committee consisted primarily of clinicians and other experts who determined the safety, effectiveness, and unique clinical aspects of the drug. If it met their standards, it was included in the formulary. It was rare for a drug that was FDA-approved and met these criteria to be excluded. The drug formulation was created as a clinical tool and the methodology associated with its creation ensured consistency and confidence in the model. Unfortunately, this is no longer the case. Today, drug prescriptions are a financial instrument directly linked to drug discounts with little or no link to clinical support. In fact, they are often in direct conflict with the goal of a patient receiving the medication that will help them most. What started as a tool has now become a weapon.

Drug formularies are not the only means of managing drug benefits. Drug Usage Management (UM) programs are often used in conjunction with drug formulations to ensure clinical effectiveness and efficiency. The two most common UM programs are preauthorization and step therapy. Prior authorization is often used to ensure that medications prescribed and dispensed adhere to appropriate medication diagnosis agreements and nationally accepted guidelines.

Over the past decade, the science behind drug development and clinical decision-making related to drug management have evolved. Increasing knowledge of the human genome and chemical and clinical biomarkers is making it possible to better define which drugs work under specific conditions in specific patients. Study results have shown that most medications only have a 50 percent chance of being effective and patients often have to try two or three medications before finding one that works for them. The use of pharmacogenetics and pharmacokinetics has increased the likelihood of clinical success and reduced the complication and side effect profile. The improved scientific knowledge associated with prescribing not only impacts clinical outcomes, but also significantly reduces overall healthcare expenditure through better targeted prescribing. A 2023 article published on AJMC.com, the website of The American Journal of Managed Care^®discussed significant improvements in healthcare costs and clinical outcomes through the use of pharmacokinetics and pharmacogenetics.² The era of population-based prescribing is soon coming to an end. Unfortunately, these scientific methods are rarely used in the creation of a formulary or the associated UM programs.

Although a more personalized and precise medication management paradigm has evolved, drug formulations have moved from the clinical model to one more often tied to financial characteristics rather than clinical considerations. Over the last 10 years, there has been an increasing number of medications being removed from the drug list for non-clinical reasons. In fact, more than 600 FDA-approved drugs are now excluded from major PBMs' formularies each year. These exclusions have no clinical basis and are based primarily on the level of drug rebate available to the PBM. Today's formulary is based on a financial one Bidding war. This creates a situation where a patient may not have access to medications that can improve or cure their condition.

Joanne is a 49-year-old woman with diabetes who takes three medications to control this chronic condition. Her diabetes was well controlled with her medications for several years until January 2023. At this point, one of her diabetes medications was removed from the formulary and no longer covered by her insurance. She was told she needed to change one of her brand medications for non-medical reasons. To make this change, Joanne had to undergo three visits to her GP and four blood tests to determine what replacement medication would be. After significant out-of-pocket costs and seven months, Joanne's diabetes was back under control.

As seen in this example, a nonmedical switch based on a financial arrangement rather than clinical considerations results in patients being unable to receive medications that meet their scientific, clinical, or financial needs. It not only costs the patient's health and money, but also the payer. This new model can reduce the unit cost of a drug through discounts and bulk purchasing, but it increases the cost of the entire treatment and reduces the value of the drug. Financial arrangements with clinical implications such as this call into question whether payers are fulfilling their fiduciary responsibility by balancing the patient's interests with their actions. This has become a growing problem as laws like the Consolidated Appropriations Act of 2022 require employers to act as fiduciaries for their employees.

In recent years, there has been increasing focus on the benefits of pharmaceuticals due to a lack of transparency in the industry's business practices. In response, several possible legislative solutions focused on the PBM industry have been proposed. The Patient Right to Know Drug Prices Act of 2018 and the Know the Lowest Price Act of 2018 are legislative solutions focused on cost transparency. These changes are necessary, but they are not enough. Unfortunately, to date there is no legislation focused on the proper use of drug formulas. Today's formularies are a tool for organizations to make money, not a tool for patients to access the right medications for their conditions. A less expensive Medications that are incorrect Medicines cost patients, payers and society money. Legislators should consider implementing laws that:

• Remove the relationship between drug formulas
  and discounts
• Remove the relationship between drug use management programs and rebates
• Make sure no FDA-approved medications are excluded from a formulary
• Make the appeals process available to all patients taking medications
• Prohibit non-medical switching

These legislative measures should return formulary to a clinical basis and help align it to better cover appropriate medication use. Unfortunately, the incentives are not all aligned. Today's rebate-based formulary model can add significant value to the PBM industry by generating revenue and potentially short-term profits for the payers who share in the rebate revenue. This model does not help the patient or his doctor, who tries to treat the patient with the most suitable medication for him. Furthermore, this is Financial priority The pharmacy benefit model does not help the payer (i.e., employer, government, value-based provider, or insurance company) in the long term because the wrong drug leads to poor outcomes and increased long-term costs.

Science is advancing in exciting ways. Drugs are being discovered that treat conditions that have either been inadequately treated or not treated at all. This creates the opportunity to improve health and reduce costs. That is the true definition of value. It is time for drug formulations to focus on expedient vehicles rather than a financial instrument. We must create a model where all parties can meet their clinical and financial needs. Legal remedies can help pave the way to pharmacy-based value creation.

Information about the author

Dr. Berger is CEO of Health Intelligence Partners in Chicago, Illinois, and a member of the editorial board of Population health, equity, and outcomes.

REFERENCES

1. Kirzinger A, Montero A, Sparks G, Valdes I, Hamel L. Public opinion on prescription drugs and their prices. KFF. August 21, 2023. Accessed September 18, 2024. https://www.kff.org/health-costs/poll-finding/public-opinion-on-prescription-drugs-and-their-prices/
2. Apted T, Huff A. Pharmacogenomics for improved outcomes and lower healthcare costs. AJMC. December 15, 2023. Accessed September 18, 2024.