PHARMA/PBM: Three tier formularies work

In a New England Journal of Medicine article called The Effect of Incentive-Based Formularies on Prescription-Drug Utilization and Spending a team from Harvard found that three-tier formularies work.  Three tier formularies are what PBMs and health plans introduced in response to rising drug uilization and prices in the late 1990s. In essence the PBM puts generics, and the branded drugs for which it has negotiated the best rebates, into the cheap first and second tiers ($5 or $10 co-pays) and charges huge co-pays for the others. Amazingly enough this means that people switch.  In this study:

    Among the enrollees who were initially taking tier-3 statins, more enrollees in the intervention group than in the comparison group switched to tier-1 or tier-2 medications (49 percent vs. 17 percent, P<0.001) or stopped taking statins entirely (21 percent vs. 11 percent, P=0.04).

While the only press article I could find on this in the Boston Globe, plays up the fear that patients will stop taking their drugs, my guess is that some of those people would have given up anyway.  The key stat is that half the people switched. Presumably switching to another statin doesn’t make much difference on health. Medpundit has some interesting things to say about the clinical impacts of this switching (and, Sydney, we agree in this case!)

This is what Ian Morrison calls "the Ross Perot effect"–you can move people around for $10. (Apparently in 1992 Ross Perot spent $10 for each vote he got). Actually it’s a little more than $10 in this case, but it shows that therapeutic substitution based on money is very powerful.

My sense is that this shows that the power of the PBM has been underused. The PBMs have been mostly the handmaiden of the pharmas. For their health plans and employer clients they have in general been unwilling to really move people away from branded drugs, unable to get too many of their clients to move to very aggressive formularies, and unable to get doctors to prescribe according to the formulary.  However, this study shows that the opportunity to move people between products is very real, and with Medicare formularies on the way (in the new PBM-managed formularies) they may become even more important.

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