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Impact of a Value-based Formulary on Medication Utilization, Health Services Utilization, and Expenditures

Yeung, Kai PharmD, PhD; Basu, Anirban PhD; Hansen, Ryan N. PharmD, PhD; Watkins, John B. PharmD, MPH, BCPS; Sullivan, Sean D. PhD

doi: 10.1097/MLR.0000000000000630
Original Articles

Background: Value-based benefit design has been suggested as an effective approach to managing the high cost of pharmaceuticals in health insurance markets. Premera Blue Cross, a large regional health plan, implemented a value-based formulary (VBF) for pharmaceuticals in 2010 that explicitly used cost-effectiveness analysis (CEA) to inform medication copayments.

Objective of the Study: The objective of the study was to determine the impact of the VBF.

Design: Interrupted time series of employer-sponsored plans from 2006 to 2013.

Subjects: Intervention group: 5235 beneficiaries exposed to the VBF. Control group: 11,171 beneficiaries in plans without any changes in pharmacy benefits.

Intervention: The VBF-assigned medications with lower value (estimated by CEA) to higher copayment tiers and assigned medications with higher value to lower copayment tiers.

Measures: Primary outcome was medication expenditures from member, health plan, and member plus health plan perspectives. Secondary outcomes were medication utilization, emergency department visits, hospitalizations, office visits, and nonmedication expenditures.

Results: In the intervention group after VBF implementation, member medication expenditures increased by $2 per member per month (PMPM) [95% confidence interval (CI), $1–$3] or 9%, whereas health plan medication expenditures decreased by $10 PMPM (CI, $18–$2) or 16%, resulting in a net decrease of $8 PMPM (CI, $15–$2) or 10%, which translates to a net savings of $1.1 million. Utilization of medications moved into lower copayment tiers increased by 1.95 days’ supply (CI, 1.29–2.62) or 17%. Total medication utilization, health services utilization, and nonmedication expenditures did not change.

Conclusions: Cost-sharing informed by CEA reduced overall medication expenditures without negatively impacting medication utilization, health services utilization, or nonmedication expenditures.

Supplemental Digital Content is available in the text.

*Pharmaceutical Outcomes Research and Policy Program, University of Washington

Department of Health Services, School of Public Health, University of Washington, Seattle

Premera Blue Cross, Mountlake Terrace, WA

Supported by funding from the National Institute National Center for Advancing Translational Sciences (TL1-TR000422) and the Agency for Healthcare Research and Quality (R36-11639393).

J.B.W. is an employee of Premera Blue Cross. Premera had no role in the design, conduct, and reporting of this study. The remaining authors declare no conflict of interest.

Reprints: Kai Yeung, PharmD, PhD, Pharmaceutical Outcomes Research and Policy Program, 1959 NE Pacific Street, Health Sciences Building, Room H-375, P.O. Box 357630, Seattle, WA 98195-7630. E-mail:

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