1. Promoting high quality, cost effective drug therapy throughout the Military Health System Evaluating the Clinical Effectiveness and Cost Effectiveness of Pharmaceutical Agents CDR Denise Graham, MSC, USN Director, PEC Clinical Operations

2. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 2 Presentation Outline Introduction Provide a synopsis of the Uniform Formulary (UF) decision process Describe the process by which drugs are analyzed for Uniform Formulary determinations Describe PEC process for determining “relative clinical-effectiveness” Present a brief overview of the PEC process for determining “relative cost-effectiveness” –Pharmacoeconomic Analysis –Budget Impact Analysis

3. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 3 Introduction 32 CFR Part 199, Civilian Health and Medical Program of the Uniform Services (Champus) / TRICARE: Implementation of the Pharmacy Benefits Program, implements section 701 of the National Authorization Act for Fiscal Year 2000, which –“establishes procedures for the inclusion of pharmaceutical agents on a uniform formulary based upon the relative clinical effectiveness and relative cost-effectiveness” (Federal Register / Vol. 69, No. 63 / Thursday, April 1, 2004 / Rules and Regulations)

4. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 4 DoD P&T Committee Formulary Recommendations UF Drugs not covered by TRICARE (i.e., inpt meds, OTCs, weight loss meds, smoking cessation meds, etc.) BCF drugs ECF drugs Other UF drugs Nonformulary drugs

5. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 5 MTF Formulary Considerations UF Drugs not covered by TRICARE (i.e., inpt meds, OTCs, weight loss meds, smoking cessation meds, etc.) BCF drugs ECF drugs Other UF drugs Nonformulary drugs

6. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 6 MHS Drug Universe UF Drugs not covered by TRICARE (i.e., inpt meds, OTCs, weight loss meds, smoking cessation meds, etc.) BCF drugs ECF drugs Other UF drugs Nonformulary drugs Smallest Possible MTF Formulary Largest Possible MTF Formulary Typical MTF Formulary

7. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 7 Purpose of Talk What it is NOT: Inform MTFs how to conduct clinical and cost evaluations What it is: Provide an understanding of the in-depth analyses conducted by the PEC for presentation to the DoD P&T Committee.

8. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 8 Roles Within the Military Health System PEC identifies opportunitiesDoD PTC defines class: agents and BCF or ECF PEC performs clinical and cost analyses PEC solicit and collate provider input Collaborate with VA PBM PEC presents recommended strategy and alternatives to DoD PTC DoD PTC evaluates analyses and makes recommendations

9. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 9 Committee Responsibilities Evaluate clinical effectiveness and cost effectiveness of pharmaceutical agents Recommend pharmaceutical agents for: –Uniform Formulary –Basic Core Formulary –Extended Core Formulary Medical necessity criteria for drugs classified as non-formulary (3rd tier) Restrictions / limitations –Prior authorization –Quantity limits –TRRx and TMOP Recommend effective date of change from formulary to non- formulary (may be no more than 180 days )

10. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 10 Synopsis: UF Decision Process DoD P&T Committee The DoD Pharmacy & Therapeutics Committee (P&T) –Considers the relative clinical effectiveness and cost effectiveness of pharmaceutical agents in a therapeutic class in recommending the selection of agents for the DoD Uniform Formulary (UF) and the classification of a pharmaceutical agent as generic, formulary, or non-formulary

11. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 11 Synopsis: UF Decision Process DoD P&T Committee Does the drug qualify as a TRICARE Outpatient Pharmacy Benefit No UF Decision. Local Policy dictate formulary eligibility NO UF tier classification determination YES Is drug in a class that is BCF Or ECF? 1 st tier generic 2nd tier “formulary” Non Formulary at MTF TMOP/TRRx: $22/Rx Medical Necessity 3 rd tier “non-formulary” ECF determination NO Yes Must be formulary at MTFs if drug class needed by providers Yes May be formulary at MTFs if drug class needed by providers NO

12. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 12 Synopsis: UF Decision Process DoD P&T Committee Must be formulary at all MTFs YES May be formulary at all MTFs NO BCF determination YES

13. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 13 Formulary Decision Process Drug Class Review Process for Uniform Formulary Decisions Day 1, F

14. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 14 Formulary Decision Process Overview Drug Class ReviewNew Drug Review UF Recommendation BCF Recommendation BCF Change Request ECF Recommendation ECF Change Request

15. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 15 New Drugs and the UF Scenario #1 – New drug in an established drug class already evaluated by the Committee Scenario #2 – New drug in a drug class not yet evaluated by the Committee Scenario #3 – New drug in a new drug class

16. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 16 Drug Class Review 1.Define drug class 2.Evaluate feasibility of classifying one or more drugs as non-formulary on UF –Therapeutic interchangeability –Coverage of clinical needs –Provider acceptance –Other factors 3.Evaluate clinical effectiveness 4.Evaluate cost effectiveness 5.“ESTOP” analysis supports steps 2-4

17. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 17 ESTOP Analysis E fficacy: What is it used for and how well does it work? S afety: How likely is it to cause harm? T olerability: Are patients likely to take it? O ther: Any other factors we can think of P rice/Cost: Key factor in cost effectiveness

18. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 18 Efficacy Compare the drugs on what they are used for and how well they work Analysis plagued by general lack of head- to-head trials Critical evaluation of medical literature –Meta-analyses –Randomized clinical trials –Other studies & published abstracts ‘Efficacy’ vs. ‘effectiveness’

19. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 19 Safety Compare the drugs –Contraindications –Warnings/precautions –Incidence and severity of adverse effects –Other evidence of risk Length of time on market and provider experience can affect “confidence” in the safety profile of a drug.

20. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 20 Tolerability Compare the drugs on: –Frequency of administration –Ease of administration –Frequency of irritating or uncomfortable side effects Available measure: discontinuation rates during clinical trials –Often underestimates likelihood of discontinuation during “real use” –Must be compared to discontinuation rate in placebo arm

21. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 21 Other factors Utilization patterns Competitive forces Patent life expectancy –time to generic availability Political factors Packaging issues Operational considerations

22. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 22 Price/Cost Key factor in cost effectiveness comparison Should compare all direct medical costs (not just drug acquisition cost)

23. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 23 Feasibility of Non-Formulary Recommendation Therapeutic Interchangeability Extent to which agents are similar in: –Clinical attributes –FDA indications and off-label uses –Patient populations –Clinical outcomes

24. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 24 Feasibility of Non-Formulary Recommendation Coverage of Clinical Needs Should be able to meet clinical needs of at least 90% of patients without using the drug(s) classified as non-formulary on the UF Related Questions –Do patients failing one agent typically respond to another agent in the same class? (inter-patient variability) –Do providers typically try multiple agents in this class before moving on to another therapy option?

25. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 25 Feasibility of Non-Formulary Recommendation Provider Acceptance Willingness of providers to use formulary drugs and refrain from using non-formulary drugs New patient starts –Willingness to use a particular agent in a class –Duration on the market, available safety data Switch patients from non-formulary to formulary –Willingness to abandon current therapy –Perceived likelihood of similar clinical outcome –Perceived level of work involved in making switch (i.e., supplemental visits and lab tests)

26. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 26 Feasibility of Non-Formulary Recommendation Other Factors Utilization patterns Level of competition in drug class Political issues

27. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 27 Clinical Effectiveness Evaluations UF Rule states: “…Committee will evaluate the relative clinical effectiveness of pharmaceutical agents by considering information about their safety, effectiveness, and clinical outcome.” The terms “clinical utility” or “clinical value” might be synonyms for “clinical effectiveness”?

28. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 28 Clinical Effectiveness Evaluations UF Rule has high threshold for UF inclusion: “It is presumed that pharmaceutical agents in a therapeutic class are clinically effective and should be included on the uniform formulary unless … a pharmaceutical agent does not have a significant meaningful therapeutic advantage in terms of safety, effectiveness, or clinical outcome over the other pharmaceutical agents included on the uniform formulary…”

29. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 29 Clinical Effectiveness Evaluations No “gold standard” method or format for comparing clinical effectiveness Some possibilities for describing the relative clinical effectiveness of agents in a drug class: –Divide into groups: (A&C are more effective than B&D) –Rank order: (A>C>B>D) –Rank order and describe the differences: A a lot better than C C somewhat better than B B just barely better than D Must state the “because” in all cases

30. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 30 UF Final Rule: Relative Cost-Effectiveness The UF final rule states –“If a pharmaceutical agent in a therapeutic class is not cost-effective relative to other pharmaceutical agents in that therapeutic class, it may be classified as a non- formulary agent” (Federal Register / Vol. 69, No. 63 / Thursday, April 1, 2004 / Rules and Regulations) Note: –The Uniform Formulary uses the term cost-effectiveness generically to refer to the four common types of pharmacoeconomic analyses: cost-minimization, cost- effectiveness, cost-benefit, and cost-utility

31. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 31 PEC’s Process for Determining Relative Cost Effectiveness To determine the relative cost-effectiveness of agents within a therapeutic class and to inform healthcare decision makers on the value of a particular decision, the PEC performs two types of analyses –A pharmacoeconomic analysis –A budget impact analysis

32. Promoting high quality, cost effective drug therapy throughout the Military Health System Evaluating Cost Effectiveness Maj Wade Tiller, USAF, BSC PEC Clinical Operations

33. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 33 Pharmacoeconomic Analysis: Definition “Identifies, measures, and compares the costs (i.e., resources consumed) and consequences (clinical, economic, and humanistic) of pharmaceutical products and services” (Bootman, et al., Principles of Pharmacoeconomics 2 nd Ed., New York, St. Martin’s Press,1996)

34. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 34 Pharmacoeconomic Analysis: Determining Type The evaluation of the relative cost- effectiveness of agents within a therapeutic class begins once the relative clinical effectiveness of the agents has been determined The type of pharmacoeconomic analysis performed is dependent upon the kind of outcomes being considered and the extent that these outcomes differ between the agents within a therapeutic class

35. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 35 Pharmacoeconomic Analysis: Determining Type (cont’d) An evaluation of agents within a therapeutic class that suggests no significant differences in clinical outcomes is best analyzed utilizing a cost-minimization analysis If significant clinical differences are noted between agents within a therapeutic class, one of the following analyses would be used depending on the kind of outcomes being measured: –Cost-effectiveness analysis –Cost-utility analysis –Cost-benefit analysis

36. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 36 Pharmacoeconomic Analysis: Perspective, Costs & Consequences The perspective adopted is that of the DoD MHS Costs included in the model are those relevant direct medical costs borne by the DoD MHS Consequences (outcomes) included in the model are determined during the clinical effectiveness review –Reported RCT outcomes, meta-analyses, etc.

37. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 37 Pharmacoeconomic Analysis Cost Data Medication Costs –Manufacturer’s Submitted Blanket Purchase Agreement Price for the MTF and TMOP. If a manufacturer declines the opportunity to submit a price, then the drug is evaluated at the Big 4 Federal Supply Schedule (FSS) price for the MTF and TMOP –Federal Ceiling Price (FCP) for TRRX –Manufacturer’s submitted unit prices and utilization data are used to determine the total weighted average cost per day of treatment by point of service (POS) venue Utilization data is obtained from PDTS

38. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 38 Pharmacoeconomic Analysis Cost Data Other Direct Medical Costs –Costs associated with adverse events, drug therapy monitoring, etc MHS Management and Analysis Reporting Tool (M2) data TRICARE pricing file

39. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 39 Pharmacoeconomic Analysis: Consequence Data The primary consequence or outcome measure is established as part of the relative clinical effectiveness determination Primary outcome data can be obtained –From the literature –Directly from M2 database

40. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 40 Pharmacoeconomic Analysis CMA Example Cost Minimization Analysis (CMA) –Is a type of pharmacoeconomic analysis comparing two or more alternative therapies in terms of costs because their outcomes (effectiveness and safety) are found to be or expected to be equivalent Compare drug A versus drug B for treatment of GERD

41. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 41 CMA Determining Cost DrugPOSStrengthPriceTabs Disp Days TX Avg Tabs / Day of TX Cost / Day of TX Total Cost Wgt’d Avg Cost / Day of TX A TMOP 25mg$0.50100911.1$0.550$50 $0.697 50mg$0.751501431.05$0.788$113 Totals250234$163 MTF 25mg$0.506005001.2$0.600$300 $0.713 50mg$0.758007621.05$0.788$600 Totals9001262$900 TRRX 25mg$1.003253101.05$1.050$326 $1.19 50mg$1.253753571.05$1.313$469 Totals700667$795

42. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 42 CMA Decision Tree Results

43. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 43 Pharmacoeconomic Analysis Limitations This model does not account for other factors, revenue, and costs associated with a potential decision to place one or more agents into the 3 rd tier, such as: –Market share migration –Co-pays –Medical necessity processing fees –Switch costs

44. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 44 Budget Impact Analysis Purpose In general, Budget Impact Analyses (BIA) are performed to provide insight into the budget impact of the inclusion of a new intervention to address the issue of affordability The DoD PEC performs a BIA to: –First, to validate results of the pharmacoeconomic analysis in the determination of relative cost effectiveness –Second, to provide an estimate of the MHS budget impact of a decision to move one or more agents of a therapeutic class to the 3 rd tier for each point of service

45. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 45 Budget Impact Analysis Description Models the MHS budget impact dynamics of a UF decision to place one or more agents of a therapeutic class into the 3 rd tier Factors included in the model –Market share migration Change in utilization among therapeutic class agents as beneficiaries migrate from 3 rd tier to 2 nd tier agents –Costs associated with migration from 3 rd to 2 nd tier agents Medical necessity processing fees Provider costs associated with switching patients from 3 rd tier to second tier agents –Revenue generated from 3 rd tier copays

46. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 46 Budget Impact Analysis Analysis Perform the “3 rd tier shuffle” Model two time horizons –First Year Reflects tier determination/pricing impact, costs associated with the migration of patients from 3 rd tier to 2 nd tier agents, and revenue generated from 3 rd tier copays –Second Year (after the dust settles) Reflects tier determination/pricing impact and revenue generated from 3 rd tier copays only

47. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 47 Budget Impact Analysis Results 1 st and 2 nd year post-decision costs are compared for the different 3 rd tier selection scenarios The relative cost-effectiveness of placing one or more agents of a therapeutic class into the 3 rd tier of the uniform formulary is determined

48. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 48 Uniform Formulary Recommendation Conclusion When making an UF recommendations the DoD P&T Committee considers: –the relative clinical effectiveness analysis –and the relative cost effectiveness analysis (pharmacoeconomic analysis and budget impact analysis)

49. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 49 BCF or ECF Decision A Basic Core Formulary or Extended Core Formulary decision for a therapeutic class –Is considered only after the uniform formulary decision is made –Only considers the uniform formulary agents i.e., agents in the 3 rd tier are not eligible –Is made using the same process that was used for the uniform formulary decision, except with BCF or ECF pricing

50. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 50 Synopsis: UF Decision Process Director, TMA The Director, TRICARE Management Activity (TMA) – Considers the determinations and recommendations of the DoD Pharmacy and Therapeutics Committee, as well as comments and recommendations of the Beneficiary Advisory Panel, in making the final decisions regarding the UF

51. DoD Pharmacoeconomic Center www.pec.ha.osd.mil 51 ?