Cost-Effectiveness Analysis and the Formulary Decision-Making Process

Abstract

BACKGROUND:

Faced with high drug expenditures in an environment of cost containment, drug formulary systems, particularly in managed care, have become more dependent on pharmacoeconomic evaluations to assess the value of new products. Within pharmacoeconomics (PE), cost-effectiveness analysis (CEA) is the most commonly used method. However, current methodological concerns about CEA have limited its practical contribution to the formulary process. Advances in analysis are likely to improve the relevance of CEA over time.

OBJECTIVES:

The purpose of this paper is to review CEA, its limitations, and its applications in formulary decision making in order to promote greater utility of CEA for managed care pharmacists.

SUMMARY:

Enhancements to CEA, such as the development of modeling software, rank-order stability analysis, cost-consequence analysis (CCA), and budget impact analysis are discussed. A combined method of CCA-CEA and standardized guidelines are suggested to improve the impact of CEA in the drug formulary process.

CONCLUSIONS:

Along with advances in its methodology and relevant standardized guidelines, CEA will gain increased importance in formulary decision making, helping to assure the goal of cost containment while ensuring quality of care.