PMA4: AN ECONOMIC PROOF AND APPLICATION THAT FORMULARY RESTRICTIONS WITHIN DRUG CLASSES ALWAYS RESULT IN HIGHER COSTS

Abstract

Pharmaceutical benefit providers use restrictive formularies to control health care expenditures for drugs. One type of restriction requires the use of one drug before the use of another drug within the same drug. OBJECTIVE: Test the hypothesis that restrictive formularies lower expenditures for pharmaceuticals. METHOD: We use expected utility theory to derive equations for the restrictive and unrestrictive formulary cases where the equations take into account effectiveness (i.e., the probability of attaining treatment goal and not attaining goal), alternatives if treatment fails and costs of each scenario. Administrative costs are assumed zero. We prove mathematically that restrictive formularies within drug classes always cost more. Moreover, even if all drugs in the therapeutic class are equal in effectiveness and equal in cost, the restrictive formulary will still always be more costly than the unrestrictive one. We then allow effectiveness and costs to vary and derive equation to calculate the cost of a restrictive formulary in those cases. We derive the equations for patients with various distributions of baseline severity. Last, we apply the equations and actual effectiveness and cost data to the case of atypical antipsychotics where Ontario and British Columbia Provincial formularies have mandated that risperidone be prescribed before quetiapine or olanzapine. RESULT: The cost of the restrictive status would range from $0.87?0.97 per patient per day with mild symptoms treated with risperidone, $2.65?3.30 for patients with moderate symptoms and $5.14?5.73 for patients with severe symptoms. The range depends on effectiveness rates. Even if all drug costs were equal and the efficacy rates were all 80 percent, the cost per patient per day for the restrictive status of quetiapine would be $0.66?0.71, $1.12?1.41, $1.67?2.26 for risperidone patient with mild moderate and severe symptoms. CONCLUSION: To our knowledge this is the first proof and practical application. Restrictions were removed in both provinces.