Why purge physical items when we can just rent additional storage space? Why delete digital files when we can just buy more memory? Well, are you familiar with the adage, “out with the old, in with the new”? Healthy individuals, organizations, and societies must effectively manage waste. That’s easier said than done; what’s garbage is not always obvious. As individuals, it can be challenging to identify the ideas and things that no longer serve us. As groups, alignment on what is garbage is harder to achieve — one’s trash is another’s treasure.
The lack of agreement on which prescription drugs are “wasteful” exposes conflicts of interest between stakeholders. Increasingly, payers (or plan sponsors) demand closed formularies and call for exclusions on open formularies for products they deem wasteful. Paradoxically, PBMs may want to exclude some arguably wasteful products from formularies and, simultaneously, may want to keep some arguably wasteful products on formulary.
Garbage reporting
A vocal commentator notes that several hundred products have been excluded from the formularies of the three largest PBMs — CVS Health, Express Scripts, and OptumRx. This commentator appropriately highlights potential downsides of some exclusions, such as when out-of-pocket costs are higher because of coverage of products with higher list prices while competitors with lower list prices are excluded. But this biased “reporting” conveniently fails to mention that most exclusions are appropriate because they target wasteful products. An analysis based on a simple count of exclusions over time without any attempt to separate valued and wasteful products or control for the total number and, better yet, total cost of products over time is rubbish. As they say, garbage in, garbage out.
Wasteful drugs
The Pacific Business Group on Health (PBGH) guidebook Removing Waste From Drug Formularies defines “wasteful” drugs as those that don’t provide additional clinical value when compared with less-expensive drugs used for the same condition. The guidebook identifies categories of wasteful drugs as follows:
- High-cost, multisource branded or generic products for which less-expensive options are available
- Fixed-dose combinations (“combo drugs”) with two or more active ingredients in one pill that cost substantially more than the individual ingredients in separate pills
- Drugs for which over-the-counter (OTC) options are available
- Me-too drugs which make immaterial tweaks to an existing molecule to make a “new,” more-expensive drug that adds no clinical value versus the less-expensive original version, including:
- Salt or chemical form of the active ingredient
- Formulation
- Absorption speed
- Strength or concentration
PBGH commissioned an analysis of drug-utilization data from 15 self-insured plan sponsors. The results suggested that 3% to 24% of total pharmacy benefit spend could be saved by excluding high-cost, low-value drugs from formularies. The analysis also found that brand-name drugs made up 42% of “wasteful” prescriptions, and that the following eight drugs accounted for 21% of total potential savings:
- Metformin HCL ER (MOD + OSM)
- Dexilant
- Duexis
- Mometasone furoate
- Absorbica
- Solodyn
- Esomeprazole magnesium
- Jublia
Authors of the PBGH guidebook assert that “there are more than 800 drugs on the market today that can be considered wasteful.” If this is true, then PBMs’ exclusion lists could be even longer than they are today.
Tossing out a few examples
In Currant’s work with payers, Duexis, Vimovo, and Pennsaid are frequently identified as high-cost, low-value drugs. Payers have used terms such as “garbage” or “a waste of money” to describe these products. Significant price hikes by Horizon Pharma around 2015 put these products in payers’ crosshairs. All three are fixed-dose combinations and drugs for which OTC options are available — and as such, they fall into two categories of “wasteful” drugs, by PBGH criteria. Today, these products, currently marketed by Amgen, are excluded from most commercial formularies.
Payers also frequently point to Glumetza as a wasteful product. An extended release of metformin, Glumetza was valuable enough when Valeant (now Bausch Health) priced it appropriately. But its value tanked when its price skyrocketed following Valeant’s pay-for-delay deal with Lupin Pharmaceuticals, a generic manufacturer. Bausch Health subsequently agreed to pay $300 million to settle a related lawsuit for ill-gotten gains. Now that lower-cost generics are available, Glumetza is excluded from most commercial formularies.
Despite insufficient evidence of a clinical benefit, Aduhelm received accelerated approval from the FDA in June 2021. Concerned about the potential waste, payers rejected what the FDA approved — CMS restricted Medicare coverage and Aduhelm was excluded from most commercial formularies. On January 31, 2024, Biogen announced that it will discontinue the development and commercialization of Aduhelm. Clearly, Biogen’s decision to scrap Aduhelm was based on economic concerns. Remarkably, Biogen’s announcement noted that this decision was not due to safety or efficacy concerns. Well, payers had safety, efficacy, and cost concerns.
Embrace the complexity
Wasteful drugs are often excluded from formularies. They are typically excluded from closed formularies and often disadvantaged on open formularies with a higher tier placement or step therapy requirement. Wasteful drugs, however, can remain on formulary for a variety of reasons. Wasteful drugs are sometimes covered to avoid member “noise” and/or provider “abrasion,” especially friction with certain specialists, such as oncologists.
Yes, wasteful products are sometimes included on formularies in exchange for larger rebates, especially when they command a significant market share that increases the value of the rebates. And sometimes wasteful drugs remain on formularies because they are bundled with other valuable products, or bundled with wasteful products that are valued due to their significant market shares, in portfolio contracts. Good luck trying to sort out those proprietary agreements!
Rebate guarantees can indeed lead to problems, such as rising list prices and patient out-of-pocket costs or blocking biosimilar competition. Importantly, PBMs are not addicted to rebate guarantees, but many plan sponsors are. And to feed the beast, PBMs may discourage or even block formulary exclusions that all but the largest plan sponsors request. Plan sponsors: Be careful what you ask for.
It is complicated, and reductionist observations of formulary exclusions are uninformed, biased, or both.
Out with the old, in with the new
Drug manufacturers develop and market products that are needed and wanted, but they also develop and market products that are wasteful, including some products that were once valuable. Just like drugs, formulary exclusions are not all good or bad. We must effectively use formulary exclusions to make space for the new innovative drugs we need and want.
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