The Use of Cost Effectiveness Analyses by PharmaceuticalBenefit Managers

Henry G. Grabowski and C. Daniel Mullins

No 95-50, Working Papers from Duke University, Department of Economics

Abstract: Pharmacy benefit management companies (PBMs) have emerged over the past decade in response to increased demand for health care cost containment. The ability to obtain volume rebates from drug manufacturers was the principle value added by the PBM industry during the early 1990s. However, PBM firms anticipate a growing future role in the management of patient care (disease management) for certain high cost chronic diseases and conditions. As the scope of PBM activities broadens over time to various disease management activities, the importance to PBMs of drug cost-effectiveness (C-E) studies is expected to increase significantly. At present, however, PBM formulary decision making based on C-E studies has been limited because few C-E studies have compared therapeutic substitutes in populations with characteristics that are similar to those of PBM client enrollees. The data infrastructure inherent to the PBM industry and the increasing number of PBM employees with advanced training in pharmacoeconomics will permit the industry to perform their own internal C-E studies. The PBM industry s desire for C-E studies with "real world" medical practice environments and comparators may also lead to participation in joint ventures with drug manufacturers, HMOs, and academic institutions. Based on interviews with top management, PBMs tend to favor active participation in the development of methodological approaches to C-E studies over regulated guidelines such as those proposed by the FDA in 1995.

JEL-codes: D61 I11 (search for similar items in EconPapers)
Date: 1995
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Published under the title "Pharmacy Benefit Management, Cost-Effectiveness Analysis and Drug Formulary Decisions," in SOCIAL SCIENCE AND MEDICINE, Vol. 45, 1997, pages 535-544

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