Using a Budget Impact Model Framework to Evaluate Antidiabetic Formulary Changes and Utilization Management Tools.

Area of Science:

• Health Economics and Outcomes Research
• Pharmacoeconomics
• Managed Care Pharmacy

Background:

• Traditional budget impact models assess new drug financial consequences.
• This study extends the budget impact framework to evaluate formulary and utilization management (UM) policy changes.
• Managed care organizations (MCOs) face evolving questions regarding policy impacts on budgets.

Purpose of the Study:

• To predict the 3-year annual budgetary impact of TRICARE's antidiabetic formulary and UM policy changes.
• Utilized TRICARE claims data to forecast financial consequences of policy modifications.

Main Methods:

• Developed a budget impact model in Microsoft Excel over a 3-year horizon.
• Incorporated health plan claims data, drug costs, rebates, dispensing fees, and patient cost-sharing.
• Conducted sensitivity analyses on utilization switch rates, costs, and implementation delays.

Main Results:

• Predicted increasing annual savings, from $24 million in Year 1 to $43 million in Year 3, for 623,827 affected individuals.
• Primary savings originated from drug acquisition costs, exceeding those from rebates, copays, and dispensing fees.
• Sensitivity analyses confirmed savings across varied parameters, with an exception for a scenario of zero utilization switch.

Conclusions:

• The budget impact model successfully predicted significant cost savings resulting from payer formulary and UM policy changes.
• This framework offers a valuable tool for MCOs to assess the financial implications of policy interventions.