It appears that the formulary with the lowest net cost will consist of clinically equivalent drugs with the lowest total cost. But in the complex world of drug pricing and pharmacy benefits, this is not the case.
The lowest net cost formulary is a good way for organizations to reduce pharmacy expenditures. These formularies replace clinically reasonable and chemically identical drugs, such as generic drugs or low-priced brands, to minimize costs. This is the opposite strategy of maximizing rebates, which usually accompany the highest-priced drugs. This is what the lowest net cost means: the actual price after the rebate is applied.
Surprisingly, there are often clinically the same but lower-priced drugs that do not appear on the lowest net cost formulary. The reason is that even the lowest net cost formulary usually includes popular drugs. The cost of these drugs may be lower, but they are usually not the lowest net cost drugs to treat the disease.
Lowest net cost drugs that are underutilized
In some of the most popular rebate biological categories, a few drugs account for more than half of the market. Even the lowest net cost prescription includes them.
There may be much cheaper equivalent drugs, but no one uses them. Prescribers do not write prescriptions because they want to make sure that the drugs they prescribe are covered. The formulary does not include them because they want to minimize the interference of sending patients to more obscure medications and maximize the retention of rebates. This is a feedback loop.
Patients who have taken a well-known drug for many years do not like being forced to change, even if it is a much cheaper equivalent drug. In addition, because the savings are used for employers or health plans, patients have no incentive to change.
When your organization asks for the lowest net cost formulary, what you really want to say is, “I want the maximum contract discount consistent with my formulary without interruption.” For some organizations , This is a reasonable choice. It should not be confused with actually obtaining the lowest net cost drug.
The devastating effects of expensive drugs
Although moving to a new, clinically equivalent drug is disruptive for patients, the cost of healthcare in many organizations is growing so fast that making this type of change is the most attractive option. It is easy to see the savings potential of utilization data. There are a few drugs in each category, accounting for 90% of the utilization rate. For those lesser-known drugs, there are usually alternatives with the lowest net cost.
For example, the annual cost of a biological agent can easily reach US$100,000. There may be a similar biologic or biosimilar available for use, and it will cost $35,000 per year to treat the same disease. Switching from one member to another should have no clinical impact, but it may be unpopular. However, the cost difference is so significant that PBM has begun to motivate patients to use biosimilars. Organizations that want to optimize the lowest net cost drugs can do the same.
How to make the switch
Welfare managers and brokers tend to prefer prescription drugs with the lowest net cost because they don’t want to falter by actively pursuing the lowest net cost drugs. I get it. But I often ask them, “Do you know that your prescription drugs have high-cost generic drugs? Are you aware that there are drugs on your formulary that have not been approved by the FDA, or that you have spent a lot of money to buy multi-sources without tax refunds? Brands, and others are profiting from your data? Did you know that your formulary might include low-cost and often high-cost reformulations of generic drugs?”
In a health care system where costs are rising and options are often felt to be very limited, moving from the lowest net cost formulary to the lowest net cost drugs is a lever you can pull. There are several ways to do this. You can ask your PBM to change your formulary to include specific lowest net cost drugs.
If your PBM declines, health plans can create their own formulary, and many people do. At the very least, you can ask your PBM to share more rebates from the lowest net cost prescription. Because despite the lowest net cost, rebates are still the name of the game for these formulary.
Photo: Gerenme, Getty Images
