USE OF COST-CONSEQUENCE MODELS IN MANAGED CARE

Functioning effectively as a pharmacy benefit manager has been defined as purchasing the best product at the lowest possible cost. In the simplest terms, this means purchasing discounted drugs; in the most complex terms, it means managing drug use. However, if the entire medical picture were analyzed, use of more expensive drugs might actually lower total direct medical costs. Currently, formulary decisions are based on both therapeutic necessity and cost. The decision to administer one drug rather than another is directed by community practice patterns and the final price. The availability of information to demonstrate differences, if any, in total treatment costs between the two agents would considerably enhance therapeutic decision making and would guide treatment by an outcome-based drug formulary. The question that requires an answer is centered on the value equation: Value = outcomes/cost. Before paying more for drug A than for drug B, the payer will demand to see value. When available, direct and indirect cost information will be applied to position drugs appropriately in a drug formulary.