If Non-Formulary Hospital, Price May Not Be the Rx

The message developed in this article is that for products not on a hospital’s formulary, getting on formulary goes beyond what might be considered strategy and tactics.

It’s useful to draw a distinction between products that might loosely be described as “interchangeable” and those considered “differentiated.” The former is subject to commodification and, for formulary position, price is king. The latter depends on a product’s features and benefits and, for formulary position, the clinical story is key. This article is focused on differentiated products that did not secure formulary position after review by hospital pharmacy and therapeutics (P&T) committees.

Hospital non-formulary

For multiple reasons, there is a tendency to assume that if your product did not get on a hospital’s formulary, reducing the net price through added discount is the surest way for positive reconsideration. While reasonable on its face, findings from research I have conducted suggest that, more often than not, lowering the net price is insufficient. Put differently, it’s not the price; it’s the data.

A prior formulary decision is not just a decision. It also sets into motion physician experience, which now becomes a key business factor. Using an old business cliché, there is an element of “if it ain’t broke, don’t fix it” that comes into play.

Unless physician experience points to problems, for a non-formulary hospital product to get on formulary, it will need to raise clinically meaningful questions about the evaluation that guided the original formulary decision. And that will depend on clinical data.

Institutionalized expert and data factors

Two core components shape the path to a hospital P&T formulary decision: the clinical monograph and the expert sub-committee recommendation. Clinical monographs are purely data driven. Developed by clinical pharmacists, the monograph provides an even-handed presentation of all published trial data. Monographs also include pricing information and cost-effectiveness comparisons.

Typically, an expert sub-committee composed of physicians who specialize in the clinical area, plus physicians whose specialties are tied to the clinical area, review the monograph. Drawing conclusions from the data and their own experience, the expert sub-committee makes a formulary recommendation to the P&T committee. P&T committees may tweak the sub-committee recommendation but, by and large, it’s the expert sub-committee recommendation that gets memorialized in the final P&T decision.

The point that bears emphasizing is that the P&T decision institutionalizes expert decision-making and peer-reviewed data.

Double hurdle for trying again

Products looking to be reconsidered for hospital formulary position face a double hurdle: First, competing against physician experience with the incumbent product, and, second, competing against the original but now institutionalized P&T decision. With little dissatisfaction in the first instance and fact-based, expert assessment behind the second, overcoming these hurdles can be challenging.

False paths forward

Recent research points to two developments the non-formulary agent might leverage to secure a favorable P&T review the second time. The problem, however, is that both have inherent limitations. The first avenue is a guideline change. One limitation is that a guideline recommendation is often equivocal and leaves room for other treatment options. The second avenue is a price change. The limitation here is that if price was not “the” defining factor in the original P&T decision, a price drop is unlikely to prompt P&T reconsideration.

Data path forward

Because the original formulary decision was based on hard evidence, and assuming subsequent physician experience suggests no problems with the incumbent, hospital environments typically require new clinical data to justify adding a product to formulary when it was not approved the first time. Research suggests any of five core issues that clinical data would need to address for a product to successfully achieve formulary reconsideration: 1) original P&T assumptions; 2) unmet need; 3) compelling new information on safety/efficacy; 4) additional benefit to a patient subgroup; or 5) new indication that off-label use can’t adequately address.

It’s frequently noted that a physician champion can be a vehicle for prompting a P&T reconsideration. Unless the champion can cite new data, though, that support alone is unlikely to be sufficient.

Ira Studin, PhD, president, Stellar Managed Care Consulting. He can be reached at istudin@stellarmc.com.