Cost Considerations Increasingly Drive U.S. Formulary and Clinical Guidelines, According to the Tufts Center for the Study of Drug Development.

BOSTON -- Formulary approval has become a de facto "fourth hurdle" for drug makers

With total spending on prescription medicines in the United States rising 13 percent to 17 percent a year, health plans are increasingly taking cost into account when deciding which new drugs to include for third-party reimbursement, according to a study recently completed by the Tufts Center for the Study of Drug Development.

The study, which examined the role of cost effectiveness in formulary and clinical practice guidelines in the U.S. and Europe, found that the more drug makers can demonstrate the cost effectiveness of their products, the more likely those drugs will be included in the formularies of health care insurance plans. Formularies are the list of medications approved for third-party reimbursement.

"While drug companies are not required to demonstrate cost effectiveness to win regulatory approval to market drugs, their ability to provide such evidence has emerged as a de facto fourth hurdle to be eligible for third-party reimbursement," said Joshua Cohen, senior fellow at Tufts CSDD and author of the study.

To gain approval from the Food and Drug Administration to market drugs in the U.S., drug makers must demonstrate safety, efficacy, and quality.

"This development may be an indication of things to come," Cohen noted. "Although no formal cost-effectiveness thresholds currently exist in the U.S., the recently passed Medicare reform law authorized $50 million in funding to conduct research on, among other things, comparative effectiveness of prescription drugs."

The Tufts CSDD study also found that:

- Sixty-five percent of pharmacy benefit managers and managed care organizations currently request drug manufacturers to provide clinical and cost evidence to support listing of newly approved pharmaceuticals.

- Nearly 30 percent of current clinical practice guidelines incorporate or refer to cost analyses. Five years ago, that figure was less than 10 percent, while 10 years ago the number was below five percent.

- Clinical practice guidelines pertaining to conditions amenable to risk factor reduction and preventive care are more likely to incorporate or refer to cost analyses than guidelines relating to life-saving care.

- While leading European clinical practice guideline committee members attribute a moderate role to cost analyses in driving topic selection and guideline development, they caution against giving undue weight to cost in prescribing decisions. A similar pattern exists in the U.S.

About the Tufts Center for the Study of Drug Development

The Tufts Center for the Study of Drug Development (http://csdd.tufts.edu) at Tufts University provides strategic information to help drug developers, regulators, and policy makers improve the quality and efficiency of pharmaceutical development, review, and utilization. Based in Boston, the Tufts Center conducts a wide range of in-depth analyses on pharmaceutical issues and hosts symposia, workshops, and public forums on related topics.