From Drug Benefit News

CVS Caremark, Express Scripts Post 2015 Formulary Exclusions

Published biweekly, DRUG BENEFIT NEWS delivers news and proven cost management strategies for health plans, PBMs, pharma companies and employers.

August 8, 2014Volume 15Issue 15

In a continuing effort to flex their negotiating muscle and control rising drug trend, CVS Caremark Corp. and Express Scripts Holding Co. on Aug. 1 released their long-awaited formulary exclusion lists for 2015. With Catamaran Corp. unveiling a new optional formulary last month (DBN 7/11/14, p. 4), this strategy is clearly here to stay — but some question just how much savings these exclusions are likely to achieve, and whether adopting the lists is worth the member disruption.

CVS Caremark in late 2011 cut 34 products from its Standard Formulary for the 2012 plan year, and has continued to eliminate select brands from that formulary ever since. The PBM last week notified clients that for the 2015 plan year, it plans to remove another 22 products — in addition to select diabetes test strips — to reach nearly 100 excluded products. During an Aug. 1 conference call to discuss second-quarter 2014 earnings (see story, p. 1), Chairman and CEO Larry Merlo said the company estimates that this “rigorous approach to formulary management” will result in overall savings of more than $3.5 billion from 2012 through 2015.

“Beginning in 2015, new-to-market products, including line extensions and new strengths, will not be included on the formulary until reviewed by the CVS Caremark Pharmacy and Therapeutics Committee and recommended for inclusion,” adds spokesperson Christine Cramer.

For 2015, Express Scripts updated its National Preferred Formulary to exclude 66 products that have “clinically equivalent, lower cost alternatives,” up from the 48 eliminated from the formulary for 2014. Express Scripts says more than 90% of its commercial clients opted to implement this formulary in 2014. For 2015, the company expects to drive more than $1 billion in savings for clients through the newly expanded exclusion list. Express Scripts adds that less than 0.2% of members will be impacted by this change.

During a July 30 conference call to discuss second quarter earnings, Chief Medical Officer Steve Miller, M.D., emphasized that the pharmacy and therapeutics committee that makes those formulary recommendations is “totally external” and does not receive a stipend from Express Scripts, and stressed that the “clinical decision is always placed first.”

He continued, “There are greater opportunities going forward to actually narrow formularies than ever before and we’ve seen this in the traditional oral solid side, but we’re now seeing a lot of competition across specialty drugs, even across oncology agents. So we really believe that in the future, we’re going to be able to narrow formularies, drive patients to the best clinical outcomes but also get phenomenal results for our plan sponsors and our members.”

Exclusions Feature Some Specialty Agents

While both lists exclude mostly traditional drugs to treat allergies, asthma, cardiovascular disease, dermatological conditions and pain, Express Scripts added hepatitis C treatment Incivek to its handful of excluded specialty products, while CVS Caremark dropped multiple sclerosis treatment Rebif.

“When a PBM removes a certain manufacturer’s drug from their formulary, it greatly rewards the remaining manufacturer with a significant increase in market share and, in many cases, an exclusive position on the PBM’s national formulary,” observes Craig Oberg, R.Ph., a managing consultant with The Burchfield Group. As the number of brand drugs dispensed has declined in recent years due to rising generic utilization rates, removing certain drugs from formularies essentially allows PBMs to maintain the rebates or discounts delivered to their clients, he explains. For those who do not opt to use the recommended formularies, however, their rebate dollars could be reduced by 30% to 50%, he points out.

“Generally speaking, the savings to the plan due to the lower drug costs generated by the new formulary are fairly small. The win for the client in agreeing to the PBM’s revised formulary is that they can maintain the status quo on rebates,” asserts Oberg. “Both Caremark and Express Scripts will boast about the high percentage of clients that have adopted their strategy of excluding products from their formularies.” But in his experience working with national employers, many clients have embraced the changes, while a subset has not agreed with the concept of formulary exclusions “but accepted the change only because they could not afford the loss in rebates,” he tells DBN.

A new National Business Coalition on Health (NBCH) brief echoes Oberg’s concern. “As with any new approach, purchasers should consider this strategy with caution and consideration of the risks and benefits,” advises NBCH, which points out that there has not yet been any independent third-party validation of the impact on pharmacy spend. “Proponents of the approach predict that there will be savings, (e.g., one PBM estimates that exclusions will lead to 2-3% savings of prescription drug spend for subscribers)….At this time, employer groups with and without exclusion strategies do not exhibit discernible differences in per member per month costs, nor trend. Further, the resulting impact on the larger medical spend is also unknown.”

“Manufacturers shouldn’t be surprised by this inevitable consequence of the generic wave,” added Pembroke Consulting, Inc. President Adam Fein, Ph.D., in an Aug. 5 Drug Channels post. “Brand-name drugs in highly generic therapeutic classes will continue to face enormous pressure for price and rebate concessions. A tier 3 formulary position no longer guarantees cost-effective patient access.”

© 2014 by Atlantic Information Services, Inc. All Rights Reserved.

For valuable insight and expert analysis on pharmacy benefit management trends, check out Drug Benefit Trends and Strategies: 2013, available at the AIS MarketPlace. Available as a printed book and a CD version, this well-organized resource serves as an “Executive Summary” of pharmacy benefits corporate activity with details of financial results, leadership changes, enrollment statistics, and mergers and acquisitions activity and includes a directory of pharmacy benefit vendors.

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