Catalyst for Payment Reform

ICER Pharmacy Reports: Three steps purchasers can take

ICER Pharmacy Reports: Three steps purchasers can take

Are you surprised to know that pharmacy costs are actually comparable to inpatient hospital spend? After all, pharmacy spend eats up 20 cents for every health care dollar a purchaser spends. For this reason and more, purchasers are very concerned around the high price of prescription drug costs, and many are seeking ways to increase the value of their pharmacy dollars.

Some purchasers have made incremental progress in managing pharmacy costs by implementing strategies such as mandatory generic programs and step therapy. Others have focused on benefit design changes, like implementing coinsurance, creating a fourth tier of coverage for specialty medications, or rolling out value-based insurance design to improve medication adherence and help save on medical and pharmacy costs down the road. Meanwhile, a few purchasers stand out for their aggressive approach to managing their pharmacy costs, like Caterpillar who brought doctors and pharmacists in-house, or Self-Insured Schools of California who has outperformed national pharmacy trend between 2014-18 by aggressively managing pharmacy waste and its formulary.

Staying ahead of the cost curve feels especially difficult every time a new specialty drug costing tens of thousands of dollars per month is released into the market, and many purchasers rely heavily on their pharmacy benefit manager and/or consultant to figure out how to best proceed in this environment. But wait… did you know there’s an independent source you can turn to for information to more proactively manage your pharmacy costs?

The Institute for Clinical and Economic Review, or ICER, is an independent research organization and is often called the “nation’s independent watchdog on drug pricing.” ICER has a systematic method for evaluating new drugs that enter the market, and it releases drug assessment reports that summarize how well the drug works, the treatment’s economic value, and other elements of value for consumers. With input from clinical experts and patient organizations, the reports also calculate a price range that represents a drug’s fair market value — a “value-based price benchmark” based on projected long-term clinical and economic outcomes. All of ICER’s reports are posted publicly on its website, and its research and report development are funded solely by sources independent of the life sciences industry or insurers.

Many Medicaid programs and private payers are using ICER reports to inform their drug coverage and pricing negotiations. And recently, CVS Health took a more structural approach by rolling out a new benefit design for all of its own employees that excludes from coverage new drugs whose price after negotiation remains above a certain cost-effectiveness threshold as determined by the ICER report. While some patient advocates express concern about this new benefit design and its potential to adversely impact patients’ access to treatment, this approach gives PBMs and purchasers more leverage in addressing manufacturer launch pricing.

The CVS model, which is being offered to other self-insured purchasers, is just one option through which purchasers can leverage ICER’s work. Even without launching a new benefit design, purchasers can also do the following:

  • Ask your PBM whether it uses ICER reports in determining its formulary, and if so, how it uses them. As an alternative, ask your PBM which independent data sources it considers when managing its formulary.
  • Review your organization’s top 25 drugs in terms of spend and confirm which condition each medication treats. Your PBM should provide you with this level of reporting, or alternatively, you can access this in your data warehouse. Then, cross-reference each drug and condition with ICER’s completed assessments. (Note, it’s particularly helpful to reference the “Report-at-a-Glance”, like this one on insulin for diabetes mellitus.) This should help you understand ICER’s perceived value of each of your costliest medications. Even reviewing your top 10 drugs by spend is a great start!
  • With the cross-referenced data, discuss with your PBM the consideration of implementing a custom formulary, i.e., removing low-value drugs from the formulary, or setting a maximum payment level for specific drugs based on ICER recommendations. Make sure you understand the full picture, specifically whether members who may be prescribed the low-value drug would have access to alternative treatment, and what the process and support for their transition would be.

Regardless of whether you end up making tweaks to your drug coverage, reviewing data from an independent source like ICER will make you a more informed purchaser. And asking the right questions will demonstrate to your PBM and other partners that you’re in the driver’s seat (or at least a co-pilot) for the long and important journey that is managing your company’s drug spending.

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