Achieve Lowest Net Cost with Clinically Driven Formulary

Updated: Mar 4

Clinically driven models are creating a buzz across healthcare. A clinically-driven model moves from a volume-based revenue system to a strategy focused on the amount saved by improving health in the pharmacy space. This strategy includes considering medication efficacy, cost of treatment, and benefit of treatment. A value-based approach has been suggested to control specialty spend and improve utilization.


In the era of high-priced medications, stakeholders, particularly brokers, consultants, and third-party administrators, need to be mindful of these models as a measurable cost-containment strategy that provides value to members, payors, and the healthcare system.


A recent study concluded that while medication utilization was not impacted by implementing a clinically-driven benefits model, the strategy resulted in a 10% net decrease of plan expenditures. Building this type of benefit plan starts by disjointing the current revenue-based model through rebate management.


The lack of rebate transparency is well-documented. This “black hole” causes plans to spend hundreds-of-thousands on covered drugs with incentivized price tags. Most formularies, constructed under revenue-based models, emphasize manufacturer rebates rather than clinical effectiveness.


Similarly, current prior-authorization and step-therapy protocols incentivize automatic prior authorizations of drugs with attached rebates. These arrangements encourage spending on medications that may not be clinically effective or financially prudent for the patient.


Carving out rebates in a clinically-based model result in better healthcare and lower costs. Rebates may still be employed where an expensive specialty medication is the best clinical option. Alternatively, an effective, lower-cost alternative may maximize savings. With rebates carved out, a client-focused benefit plan prioritizes member health, not revenue generation. This model effectively trims excess spend by covering the most cost- and medically-effective treatments rather than financially incentivized treatments.


A clinically-driven, value-based model moves the plan toward the lowest net cost without minimizing member care. With sustainability in the forefront as we move into 2021, employing rebate carve-outs may disrupt the status quo. However, this model also provides stakeholders an actionable option to control spend and deliver high-level pharmacy programs.

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