Examining Formulary Design and Provider Collaboration - Q & A with Jeffrey Dunn, PharmD, Senior Vice President of VRx Pharmacy Services

First Report Managed Care conducted an interview with Jeffrey Dunn, PharmD, one of our Editorial Advisory Board members, to discuss his daily dealings with formulary management and opinion on changes under the Patient Protection and Affordable Care Act (ACA). With the implementation of accountable care organizations and other integrated medical care teams, payer and provider collaboration is at the forefront of healthcare. Here you will find Mr. Dunn’s take on current events related to the healthcare system.

Q: In the past you have gained experience as a pharmacist and business experience. Can you talk about your background and describe your current role at VRx Pharmacy? 

A: I received a PharmD and an MBA from the University of Utah, which helped me enter managed care and focus on operations, financial, and clinical projects. I spent 12 years as a formulary and contract manager for SelectHealth, the managed care arm of Intermountain Healthcare. My main responsibilities at SelectHealth included managing the pharmacy and therapeutics (P&T) committee, overseeing the formularies, negotiating and implementing pharmaceutical drug rebate contracts, participating in care process models and education, and directing the residency program. I [moved] to VRx Pharmacy in 2013 where I have similar [job] responsibilities and am also involved in strategy, sales, and benefit development.

Q: During your career, how have benefit designs changed? What are the hot topics in benefit design currently and in the future?

A: When I first started in managed care we had just seen a move from 2-tiered benefits to 3-tiered benefits.  Over the past few years we have seen significant growth in coinsurance, deductibles, and consumer driven plans (ie, health savings accounts). Also becoming more popular are closed formularies, which have been the norm in Medicare but are increasingly being applied in commercial benefits.

Besides using closed formularies at VRx, we are developing multiple specialty tiers. This will be necessary to properly take advantage of biosimilars and specialty generics. Similarly, plans could apply the same logic to multiple drug medical tiers.

Combining tiers and closed benefits has allowed VRx to demonstrate the control necessary to achieve greater drug discounts. For example, with multiple sclerosis (MS), we openly cover 3 drugs with different mechanisms of action, cover 2 drugs after a step through of a preferred drug, and do not cover the remainder of the drugs. We have been able to negotiate rebates for drugs that are not preferred because the alternative is no coverage. Medicaid and exchange formularies will continue to focus more on cost and will be very restrictive moving forward.

Q: Comparative effectiveness research (CER) has become more common in managed care. How have you seen payers utilize CER? Can you describe CER and whether you believe it helps determine what drugs to use or to compare costs and benefits of different approaches to care?

A: P&T committees essentially use CER all the time, but rarely do we have head-to-head studies [on this]. CER is all about comparative efficacy, safety, and cost; with the goal of determining which drugs have the highest value.

We rarely use models and other forms of CER from pharmaceutical companies. Our most common method of applying CER is in specialty [pharmacy], where it is the most helpful. There, we compare efficacy and cost of drugs to determine parameters such as cost and sustained virologic response in hepatitis C, cost of achieving an American College of Rheumatology 50 response in rheumatoid arthritis, or cost of relapse avoidance in MS.

We chose similar studies across drugs in a [specific] disease state and subtract placebo response from drug response. We then divide into that the net cost per month or year, and then compare numbers. It is a very effective way to standardize different studies and value incremental efficacy. Other common forms of CER are retrospective claims analyses and comparative real-world phase 4 studies. These are types of CER that can be done in collaboration with pharmaceuticals.

Q: At healthcare meetings, you have presented on the topic of the role of managed care pharmacy in oncology. Have you seen promising developments in managing the disease? 

A: We have seen promising developments in managing oncology, but we have a long way to go. Oncology is still very emotional and political. However, we are making inroads in applying formulary controls via prior authorizations, step-edits, preferred drugs, and even contracting.

The key to oncology will likely be the evolution of payment reform and benefit design. Currently, providers and members are largely screened from total drug costs. As we are able to spread risk from payers to include other stakeholders, better decisions will be made around using more cost-effective medications first. Furthermore, managed care is in the best position of having all of the information; so evolution of things like accountable care organizations (ACOs), patient-centered medical homes (PCMDs), and medication therapy management into specialty can be successful as long as managed care supports them.

Clinically, we have seen incremental improvement in outcomes in many cancer types, but [this is] usually at a high cost. We need to do a better job of discussing when these drugs are useful and when they are not, and do a better job of educating about palliative care.

Q: Pay-for-performance has been proposed for a long time as an alternative to fee-for-service when it comes to physician payments. Do you think pay-for-performance will become more popular as the industry looks to reduce costs and improve the quality of care? What challenges are there in adopting pay-for-performance programs? 

A: Pay-for-performance programs have been in place for years and have been successful. There are different ways to apply these programs, from incentive to punitive approaches. I think these will become more popular as they relate to physician reimbursement or payment reform. It is unfortunate that we have to pay for best practice, but money gets provider attention. Pay-for-performance is a cost-effective way to encourage formulary adherence and use of cost-effective medications.

The challenge of future programs will be data management and measurement of outcomes. For example, it is difficult to standardize or define a result in oncology, depression, or any other disease state with subjective outcomes. Integration of medical, pharmacy, and lab data will continue to be a challenge; but an area of increased emphasis.

Q: Under the ACA and in other healthcare initiatives, payers and providers are encouraged to collaborate more. What kind of programs have you seen in which payers and providers work together to control costs and deliver better care? 

A: Payment reform will require better collaboration, as well as more emphasis on coordination of care in areas such as hospital discharge and readmission. However, to date, the most effective program that I have seen for improving collaboration and outcomes is integrated care management. This is applicable to ACOs, PCMHs, or any commercial structure. 

At VRx, we have reorganized care management into pods that consist of pharmacists, nurses, and mental health social workers. Pharmacists take the lead on drug problems, and nurses [take the lead] on site of care, access, etc., with both consulting social work. These professionals sit and work together rather than being on different floors or at different sites. The results have been outstanding, with millions of dollars in cost avoidance, better outcomes, and better patient and provider satisfaction. Approximately 90% of the time a provider takes the recommendation given by our pharmacists and nurses. Again, the key is access to medical, pharmacy, and lab data, but most importantly in the commitment to coordination and communication.

Q: Clinical pathway programs are receiving more attention. Can you describe clinical pathways and how the industry is using them? Is there a consensus in pathway guidelines? 

A: I think most people confuse pathways with prior authorizations. The most popular use of pathways is in oncology, but we have been using forms for years in other chronic diseases like diabetes and asthma in the form of preferred drugs and step edits. However, pathways by definition should also include incentives and education on the rationale for using certain drugs in certain patients at the right time.

There is no consensus currently. Sometimes consensus is impossible due to regional population differences. Furthermore, national guidelines like the American Diabetes Association for diabetes or National Comprehensive Cancer Network for oncology do not go far enough in comparing drugs and making recommendations for using certain drugs [instead of] others. Plans need to take the lead on pathways because they have the data, and they should include cost in order to be complete. Pathways should outline the most cost-effective plan for treating certain populations in a sequenced manner, supported by definitive evidence-based data.