WellDyne Executive Says Formulary Exclusions Are on the Rise

Exclusionary strategies, the practice of leaving drugs off formulary to save money and direct patients to more clinically effective therapies, are on the rise, and biosimilars can be structured into these programs to make them effective, said Jeenal Patel, PharmD, BCGP, a formulary manager for WellDyne, who spoke this week at the AMCP eLearning Days virtual meeting, which replaced the annual meeting of the Academy of Managed Care Pharmacy.

Higher utilization and higher unit costs of specialty drugs continue to drive overall spending upward in the US market, and these rising costs “put pressure on patients, employers, and providers,” Patel said. WellDyne is a pharmacy benefit manager (PBM) based in Lakeland, Florida.

Small Volume Increase, High-Cost Result

The year 2018 saw 5.8 billion 30-day equivalent specialty medication prescriptions dispensed, representing a 2.7% increase from 2017, Patel said. “This was primarily driven by new therapies and expanded indications for existing products.”

Specialty medications represent 2.2% of total drug prescription volume, Patel said. Use of this class of drugs has increased at twice the rate of other drugs. “This percentage may seem small, but specialty drugs contribute to a large, large portion of drug spend,” she said.

More specialty medications can be expected to debut, as “manufacturer pipelines remain robust,” which suggests that costs will push higher, she said.

These trends are pushing payers toward strategies such as formulary exclusion to control costs, Patel said.

Some of the main tactics employed include prior authorization, quantity limits, multi-tier plan design, and step therapy. They help payers to mitigate waste and focus on efficacious, safe, and cost-saving alternatives, she said.

Exclusions Are a Stronger “Deterrent”

But formulary exclusions are gaining popularity as a means of managing the type and cost of medications used. “Many times when you have an excluded or not-covered product, it’s perceived to be a stronger deterrent to usage, versus to having the product placed on a higher tier, or controlled by prior authorization or step therapy,” Patel said.

Cosmetic and fertility drugs are examples of drugs that are often placed on exclusion lists, she said. About three-fourths of 273 employers surveyed in a report used formulary exclusions, compound exclusions (nonallowed drug ingredients), or prescription exclusions, Patel said. “So, very much, it’s a common practice in formulary management today.”

Even in the specialty arena, we’re starting to see limited drugs available on formulary for narrow therapeutic areas and unique oncology indications, for example. We’re seeing decreased redundancy across the board in broader categories, such as psoriasis and arthritis,” Patel said.

The risk of exclusion can have downward effect on pricing, as it encourages drug discounting for better formulary placement. “It can also encourage manufacturers to demonstrate the value of their products, while payers are focused on trying to balance costs,” she said.

Patel said signs point to rapid growth of the use of exclusions in the future, although she cautioned that these should be utilized to promote use of the most effective drugs while saving money and reducing waste. She also said that exclusions should not be allowed to disrupt ongoing patient therapy.

PBMs are finding exclusions “one of the more attractive ways to lower costs” and develop a more competitive pricing landscape, she said.

Exclusions may apply to drugs with “hyperinflationary” tendencies, or what Patel termed “egregious year-over-year price increases.” Other agents that find themselves on the outside of formulary lists and looking in are “me-too” drugs that have different ingredients but no added clinical value, high-cost brands for which there are generic alternatives, high-cost generics, and “nonessential drugs,” which have not been approved by the FDA.

“Granular Management” of Costs

“There are a lot of opportunities out there when it comes to more granular management of these drugs,” Patel said, noting that huge cost savings are possible by looking for alternatives to high-priced, low-value products.

One tactic is to delay formulary placement for new drugs to market. This allows time to review the clinical evidence for or against a particular product. It also provides some buffer against aggressive launch promotion by manufacturers. And it enables the creation of benefit design programs that incorporate product rebates, for example, thereby allowing for better cost strategies, Patel said. These product placement delays typically do not include drugs for rare or orphan diseases.

For a strategy for reversing the increasing costs of drugs, Patel suggested a 3-part strategy: Identify the high-cost drugs that can be replaced with lower-cost alternatives; eliminate excessive utilization by employing formulary exclusion, prior authorization, and step therapy; and substitute higher-value agents via a patient engagement program.

“We have to get better,” she said. “We have to identify and substitute with clinically appropriate, lower-cost alternatives that drive the same therapeutic outcomes, and that’s going to be a combination of monitoring the robust pipeline for new generic launches, or looking to see if there are biosimilars to help promote lower cost.”

That’s not to say that exclusionary strategies don’t sometimes lead to higher-cost medications. Patel cited evidence that relatively ineffective diabetes medication on formulary led to an increase in overall costs partly because providers and patients were shifting to higher-cost medications.

Challenges of implementing exclusion practices include patient dissatisfaction with therapy changes and disruption to clinical progress, such as loss of disease control, impact on adherence, or inappropriate changes that increase total costs of care. Providers may complain and there may be a rise in appeals of prior authorization denials, Patel said.