The meaning of value in healthcare is highly dependent upon the person and organization. In my previous position at Premera Blue Cross, I used the 2004 AMCP Format Executive Committee definition of value:
“Simply stated, value in health care relates to whether a medical intervention (drug, device, program, surgery), when used to prevent or treat a condition, improves health outcomes enough to justify the additional dollars spent compared to another intervention.”
Therefore, determining value at Premera meant deriving answers to these questions: What do I get and how much (more) do I have to pay for it?
Premera launched the Value-Based Formulary (VBRx) into the commercial market to demonstrate the association of value into formulary decisions and content. The VBRx tiered drugs by “what they do” and “how well they do it,” rather than the generic/brand, preferred/nonpreferred categories. In technical terms, this translates into the Incremental Cost-Effectiveness Ratio (ICER). We explicitly set ICER limits to separate the formulary’s four tiers. Those limits were $10,000 per quality-adjusted life-year (QALY), $50,000/QALY, and $150,000/QALY. Member cost shares tracked with the ICER limits. Drugs tiered at lower costs per QALY required a lower member cost share. The implication of changing the way drugs are evaluated meant that a drug could be placed on any tier without regard to its brand/generic status.
To ensure fair and equitable formulary decisions, Premera’s internal Value Assessment Committee (VAC) consisted of external experts of physicians, health economists, a bio-ethicist, and a lay member. The best data or models available, using as much Premera-specific information as possible, informed VAC members’ determinations. Economic monographs summarized data and provided clinical, economic, and, as needed, societal contexts.
The VBRx was effective in reducing pharmacy PMPM approximately 15% without adversely impacting medical utilization. Premera continues to leverage learnings to implement value in its other formularies.
As payers continue to define value and create pilot programs to support their value interpretation, it is important for manufacturers to understand value drivers and influencers of payers. Clinical and economic differentiation of products, data-driven evidence, and outcomes become more significant as payers want to know, “what do I get for what I pay?”