For 2020, the unpredictable policy environment makes introduction of formulary approaches challenging. Existing approaches, such as rebate sharing, exclusion lists, and application of QALY measures, are likely to expand.
Although the CVS Medicare Part D Allure formulary offering was not heavily adopted, it would be reasonable to expect more implementation and/or expansion of formulary offerings that share rebates with members. The segment of the population using specialty products generates the majority of the rebates for a payer. Those same members also typically incur the highest cost share based on the coinsurance commonly attached to the products they are using. Addressing this imbalance either in conjunction with or separate from a broader effort to share rebates with members seems inevitable.
Expansion of exclusion lists will continue, and there will likely be new categories in the specialty and rare disease space. When exclusion lists were first introduced in 2012, less than 50 drugs were excluded on the CVS offering, with the most controversial being insulin. In 2019, the CVS and ESI offerings excluded almost 200 products each, specialty products among them. Specialty categories currently affected by exclusions include HCV, HIV, inflammation, oncology, PCSK9s, HGH, hemophilia, and MS. Future categories that may be represented on exclusion lists include migraine (both preventive and acute new treatments) and osteoporosis.
Price increases and exceptionally high launch prices will support the influence of quality-adjusted life-year (QALY) measures in coverage determination. In 2017, the Institute for Clinical and Economic Review (ICER) announced that it would be working with the Department of Veterans Affairs, and in 2018, CVS initiated a program that allows clients to exclude from their plan any drug launched at a price of greater than $100,000 per QALY (“breakthrough” therapies excluded). Surveys of formulary decision makers have found that almost half of the respondents use ICER analyses as part of their product selection process. It would not be surprising if more payers formally adopt the use of ICER analyses and QALY measures in 2020.
Other areas that may see more activity are indication-based formularies and “low WAC” options. Indication-based formularies are currently in use by ESI and CVS in the commercial market and are allowed in Medicare for 2020. Expect at least one of the larger Medicare plans (CVS, Cigna, Humana) to bring forward such a design for 2020. Regarding “low cost” options, the ESI Flex Formulary premiered in 2019 largely in response to authorized generics in the HCV space. “Low WAC” formularies help to address member cost share, biosimilar adoption, and can allow a plan to take advantage of manufacturer price reduction strategies (eg, authorized generics, WAC reductions) without impacting existing financial arrangements. It would not be surprising to see this approach become more widely utilized.
To summarize, although the policy environment is not conducive to highly innovative ideas, there is ample opportunity to create and expand formulary offerings that address the current trends of price control and member affordability.