Impact of a Value-based Formulary on Medication Utilization, Health Services Utilization, and Expenditures

Area of Science:

• Health Economics
• Pharmaceutical Policy
• Health Services Research

Background:

• Value-based benefit design is a strategy to manage high pharmaceutical costs.
• Premera Blue Cross implemented a value-based formulary (VBF) in 2010, using cost-effectiveness analysis (CEA) to set medication copayments.

Purpose of the Study:

• To evaluate the impact of the VBF on medication expenditures and utilization.
• To determine the effect of CEA-informed copayments on overall healthcare costs.

Main Methods:

• Interrupted time series analysis of employer-sponsored health plans (2006-2013).
• Intervention group: 5235 beneficiaries exposed to VBF.
• Control group: 11,171 beneficiaries in unchanged plans.
• VBF assigned higher copayments to lower-value medications and lower copayments to higher-value medications based on CEA.

Main Results:

• Member medication expenditures increased by $2 PMPM (9%), while health plan expenditures decreased by $10 PMPM (16%).
• Net medication expenditure savings of $8 PMPM (10%), totaling $1.1 million.
• Medication utilization in lower copayment tiers increased by 17%; total medication and health services utilization remained unchanged.

Conclusions:

• Cost-sharing informed by CEA effectively reduced overall medication expenditures.
• The VBF strategy did not negatively impact medication or health services utilization.
• Value-based formularies can be a tool for managing pharmaceutical costs in health insurance.