Navigating the Formulary Lifecycle

Formulary Management Resource Center

Frequently Asked Questions

Off-label medication use is common and the American Medical Association estimates that 40% of prescriptions issued in the US are for off-label uses. Interestingly, off-label medication use is commonly reimbursed and payed for by both government and commercial insurers. Occasionally, off-label use may be excluded from reimbursement especially for very high-cost or highly specialized therapies and each institution should review their own reimbursement trends regularly.

Regulatory agencies that oversee health systems do not specifically prohibit the use of off-label medications; however, they do require that widespread, health system-endorsed use be reviewed and approved by the institution's P&T committee and Executive Medical Board or equivalent. This would allow the Committee to review the evidence behind the off-label use so as to balance efficacy and safety considerations. Therefore, just as with any newly FDA-approved therapy, the medication that is being requested for an off-label use should be reviewed in the usual process; however, the Committee should be informed that this use is off-label. Health systems can manage off-label use by developing EMR/EHR and CPOE strategies such as indication-based ordering, specialized dosing calculators, predetermined duration of therapy parameters and recommending monitoring to further support and guide safe use of off-label medication use.

Each health system should have policies in place that pertain to three distinct areas of ethical practice including conflicts of interest, P&T confidentiality, and financial disclosures. Examples of conflict of interest include situations where a physician who is requesting a medication to the formulary and is also serving as an advisor, consultant, or speaker's bureau for a pharmaceutical company that manufactures the medication that is before the P&T committee for formulary consideration.

Each P&T committee should also have a policy on financial disclosures and conflict of interest for P&T committee members and attendees. These disclosures and conflicts should be updated regularly and most health systems accomplish this at least once yearly. P&T committees should require that requesting providers disclose any financial conflicts or any conflicts of interest in advance of the P&T committee meeting.

P&T committee decisions are considered confidential and may be protected from discovery in litigation under specific evidence codes. Check your own institution's policy around confidentiality.

At the time of P&T presentation, if the requesting physician has a conflict of interest or disclosure, they should recuse themselves from the presentation and any ensuing deliberation and should send a designee to serve as the champion for the medication.

Medications that are FDA-approved for use for one indication may receive FDA-approval for additional indications at a later time or may be used in combination with other therapies. As a result, the expanding indications for a medication can result in increased use that may not have been incorporated into the health system's budget when the medication was first FDA- approved. For this reason, a process for evaluating newly FDA-approved indications should be established for medications that are already on the an institution's formulary. In some cases, the expanded indication may include expanded use by other populations for example expanding the indication to children. This expanded approval would require updates to dosing, administration and monitoring of the medication as well.

Once a medication is added to the formulary, many other health system-specific decisions must be made to operationalize the formulary addition. Decisions about which strength and par level to purchase, initiating EMR/EHR/CPOE updates, identifying storage locations for the medication are among a few of the most important decisions that must be made. Each organization should establish a process in which these considerations are discussed and implemented.

Organizations may decide to restrict or approve a medication for a specific indication, service (oncology, transplant, anesthesia, etc.), or setting (outpatient, inpatient, etc.). If this is a process that is in place at your organization, expanding use beyond what was approved by the P&T Committee should follow the same P&T Committee process as for a new addition. Since much work was put into the initial formulary review, updating that document with new data may be the most efficient.

If the medication is already on formulary, often new indications are not reviewed. If the medication is expensive and there are alternative agents available, an organization may elect to restrict or approve the medication for a specific indication, service, or setting. Compliance is often evaluated through the medication utilization evaluation process.

The Joint Commission MM.02.01.01 standard states, "9. Medications designated as available for dispensing or administration are reviewed at least annually based on emerging safety and efficacy information.' Organizations routinely address safety and efficacy information as it is published throughout the year. Additionally, formulary class reviews and medication utilization evaluations are completed that impact the medications available on formulary. Annually, the complete medication formulary should be reviewed and approved by the P&T Committee. One best practice is reviewing medications and dosage forms that have not been used in the last year for removal from the formulary. The changes from this review provide multiple downstream benefits (e.g., minimizing options to select in EHR, creating space in pharmacy automation, etc.).

When a medication is being considered for formulary review, health systems use the medication's direct acquisition cost to estimate the impact on the inpatient budget. The estimate involves a calculation that incorporates the estimated annual use multiplied by the direct acquisition cost of the medication. This approach may be the easiest to accomplish but it only represents the impact on the pharmacy budget with the assumption that the use will remain the same year to year and with no other changes. This excludes the costs associated with the storage, preparation, closed-system transfer devices, administration, cold supply chain management and monitoring of the medication. It neglects the costs of administering the medication, required laboratory monitoring, additional testing such as imaging, possible adverse effects, complications and potential outcomes and it doesn't account for any other costs associated with replacing previous therapies.

An in-depth financial analysis is best accomplished before the medication is presented to the P&T Committee, however it may be difficult to know what the reimbursement rate may be from government and commercial payers both from an inpatient and outpatient perspective. Many health systems will rely on using an estimated reimbursement rate based on historical use and on previous similar medications billed through each payer. A more robust analysis would include actual reimbursement rates for closed accounts.

If the medication is already on formulary, often new indications are not reviewed. If the medication is expensive and there are alternative agents available, an organization may elect to restrict or approve the medication for a specific indication, service, or setting. Compliance is often evaluated through the medication utilization evaluation process.

Patient assistance programs (PAPs) are often utilized for both outpatient and inpatient medications, with a prevalence of support being found for outpatient administration. To continue the treatment of patients on high-cost medications, including chemotherapy, health care professionals are increasingly turning to the aid of pharmaceutical manufacturer patient assistance programs (PAPs). PAPs provide brand-name medications at no cost or reduced cost to patients who meet specific program criteria, including income, prescription coverage, and residence. Oral, injectable, and infused medications are available through PAPs. For intravenous medications, there are programs that supply medications for use in the outpatient infusion clinic; there also are limited PAPs that replace medications used by uninsured patients during an inpatient admission.

In evaluating therapies to be added onto a formulary, a thorough review of patient assistance programs including pharmaceutical assistance, foundation assistance and free drug replacement programs should be reviewed as part of the formulary process for a monograph. Implementation and workflow changes with these pieces should be address in the monograph review to implement workflow changes and address continued patient care for patients on therapies.

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