Department of Defense Has Complex Process for Formulary Decisions

San Antonio—For the Department of Defense (DOD), formulary decisions are made after a complex process that includes reviews of clinical effectiveness, cost effectiveness and manufacturer bids. Representatives from the DOD recently shared the formulary process they use and the practical implications their process can have for others during a session at the AMCP meeting. The session, titled Formulary Decision-Making in the Department of Defense, was led by Lieutenant Colonel Chris Conrad, PharmD, MS, along with David Meade, BSPharmacy, PharmD, BCPS, and Shana Trice, PharmD, BCPS.

The DOD pharmacy benefit serves about 9.6 million beneficiaries who are a mix of active duty personnel, family members of active duty members, retirees, and retiree families. Beneficiaries are entitled to the pharmacy benefit based on current uniformed service or prior uniformed service and are able to retain the pharmacy benefit for life at either military, mail, or retail network pharmacies.

When it comes to pharmacy costs, the speakers reported that the DOD pays federal prices for mail order or MTF drugs, which typically run at least 24% below commercial prices. For retail pharmacy, the DOD pays commercial prices but also receives legally mandated refunds.

To decide where drugs should be placed on their formulary, the DOD holds quarterly meetings to conduct 2 to 3 drug class reviews, reviews of new drugs, and examination of any other formulary issues in order to decide in which class new drugs should be placed on their formulary.

The first step of the process is done by a Pharmacy and Therapeutics Committee (P&T) made up of military physicians, pharmacy consultants, and representatives from organizations that include the Coast Guard, US Public Health Service, and the Defense Logistics Agency, who assign drugs to a class and set a strategy. Next, they obtain price quotes from manufacturers while the DOD Pharmacoeconomic Center (PEC) reviews the clinical effectiveness of the drugs. During this process, the PEC evaluates a drug’s indications or uses, safety and tolerability, clinical coverage, therapeutic interchangeability, and prescribing and utilization patterns. Decisions are made after evaluating available research and manufacturer information. The PEC evaluates provider acceptance by using questionnaires filled out by providers who work with their beneficiaries and then assesses a drug's practice patterns using administrative claims data.

Once the clinical effectiveness evaluation is complete, the PEC conducts a cost effectiveness evaluation as well to measure the value of a drug, its cost comparison to other drugs, and any consequences of treatment alternatives in an effort to maximize the health benefit for each dollar spent. The PEC uses cost minimization analysis for drugs that have been determined through a literature review to have similar actions in the body. "In this analysis, cost of the drug is a major determinant of cost effectiveness," Dr. Meade said.

According to Dr. Meade, cost effectiveness analysis (CEA) is used to evaluate drugs that treat the same condition, but where 1 or more has been determined to be superior at treating the condition. In this process, the CEA helps place a value on increased efficacy.

"We use a 3-year time period where formulary scenarios are modeled and patients can move into and out of the system," Meade says. "We also include the impact of copays, doctor visits and other direct costs to determine which formulary scenario is best for the system." Once the PEC collects all the data it needs and conducts the appropriate analyses, they present to the P&T committee who then makes formulary recommendations to a Beneficiary Advisory Panel (BAP). The BAP, in turn, makes additional comments before passing the recommendation to a TRICARE management activity director who makes final decisions.

Once formulary changes have been implemented, the DOD revisits prior decisions to refine predictive models and inform their future decisions.