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

BACKGROUND: Value-based benefit design has been suggested as an effective approach to managing the high cost of pharmaceuticals in health insurance markets. Premera Blue Cross, a large regional health plan, implemented a value-based formulary (VBF) for pharmaceuticals in 2010 that explicitly used cost-effectiveness analysis (CEA) to inform medication copayments. OBJECTIVE OF THE STUDY: The objective of the study was to determine the impact of the VBF. DESIGN: Interrupted time series of employer-sponsored plans from 2006 to 2013. SUBJECTS: Intervention group: 5235 beneficiaries exposed to the VBF. CONTROL GROUP: 11, 171 beneficiaries in plans without any changes in pharmacy benefits. INTERVENTION: The VBF-assigned medications with lower value (estimated by CEA) to higher copayment tiers and assigned medications with higher value to lower copayment tiers. MEASURES: Primary outcome was medication expenditures from member, health plan, and member plus health plan perspectives. Secondary outcomes were medication utilization, emergency department visits, hospitalizations, office visits, and nonmedication expenditures. RESULTS: In the intervention group after VBF implementation, member medication expenditures increased by 2 per member per month (PMPM) 95% confidence interval (CI), 1-3 or 9%, whereas health plan medication expenditures decreased by 10 PMPM (CI, 18-2) or 16%, resulting in a net decrease of 8 PMPM (CI, 15-2) or 10%, which translates to a net savings of 1. 1 million. Utilization of medications moved into lower copayment tiers increased by 1. 95 days' supply (CI, 1. 29-2. 62) or 17%. Total medication utilization, health services utilization, and nonmedication expenditures did not change. CONCLUSIONS: Cost-sharing informed by CEA reduced overall medication expenditures without negatively impacting medication utilization, health services utilization, or nonmedication expenditures.