Deciding Which Drugs Get Onto the Formulary: A Value-Based Approach

ObjectivesHospitals, physicians, payers, and patients face economic and ethical decisions about the use of biotechnology drugs, commonly called specialty medications. These often target a small population, have data based on smaller clinical trials, are expensive, and may have questionable advantage. This is a result of how the Food and Drug Administration (FDA) approves medications, which is based only on safety and efficacy. Cancer drugs, once approved by the FDA, regardless of cost or value must be covered by Medicare. Some states have laws requiring additional coverage as well. All of this has created an unintended consequence: It has driven up costs with questionable evidence to support the medication’s value, placing patients, payers, and providers in an ethical conflict. In this new era of health care transformation, health care leaders must focus on creating value to support a sustainable health system. Christiana Care Health System’s Value Institute has designed a new model to evaluate specialty medications, using value as its main criterion.MethodsThis article describes the process and outcomes using a new value model for evaluating specialty medications for a hospital formulary. It also introduces a new criterion of evaluation entitled “Societal Benefit” that provides a rating on quality- of-life issues. With measurable factors of efficacy, risk, cost, and quality-of-life concerns, our methodology provides a more balanced approach in the evaluation of specialty medications.ResultsSpecialty medications are the fastest growing segment of drug expense, and it is hard to understand how these medications will be sustainable under health care reforms. Unlike other countries, the United States has no national agency providing cost-effectiveness review; review occurs, if at all, at a local level. Laws governing Medicare and most private insurers’ coverage of FDA-approved medication and some clinical quality standards conflict with cost-effectiveness, making this type of review difficult. Finally, because these medications affect the health system as a whole, it is a great example to begin to support health care reform.ConclusionsHospitals need to challenge the value of specialty medication. Although our model will continue to evolve, value is now our central consideration when selecting specialty medications to be added to the formulary. We share this experience to encourage other hospitals to design their own approach to this vital issue.