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Managed Care Compels Evaluations of Cost Effectiveness

Managed Care Compels Evaluations of Cost Effectiveness

This column focuses on an area that is critical to all medical
oncologists: the pharmacoeconomic analysis. Why should you take
note of this?

  • If you are responsible for treating patients on managed
    care contracts, you must understand how to interpret the increasingly
    prevalent reports of cost effectiveness of established and new
    therapies. If you use the least expensive treatment with the same
    or better outcome, you will have helped fulfill the goal of the
    managed care revolution in medicine.
  • If you are responsible for overseeing the managed care
    contract for your group/institution, you should be using the results
    of published pharmacoeconomic analyses to gen-erate practice guidelines
    for the diseases you treat. In this way, your group will be a
    better partner for insurers and will have an advantage in competing
    for contracts.
  • If you are a clinical investigator, you must be aware that
    if you are fortunate enough to develop a much better, more curative
    treatment for a disease, it will most probably be widely used
    only if you can document the cost-benefit in terms of QALYs saved.
    You have the responsibility to understand not only the terminology
    but also the technology of these studies.

Dr. Ramsey describes well the new paradigms in clinical practice
and investigation that will be the foundation of medical oncology
in the decades to come--Cary Presant, MD, Series Editor.

A few years ago, pharmaceutical companies had a simple motto:
Design a product that performs better than the competitors in
clinical trials and the medical world will beat a path to your
doorstep. Today, the credo has changed: Design a product that
is effective and lowers the cost of care, and managed care
plans will consider adding it to the formulary.

Managed care is revolutionizing the pharmaceutical industry in
several ways: Companies are performing cost-effectiveness studies
of new drugs, changing their marketing and price setting strategies,
and ceasing development of drugs that offer only a marginal improvement
in benefits over currently available agents within a medication
class.

The reasons for these changes relate to the change in decision
making regarding use of drugs, from its traditional source-physicians
and patients-to managed care firms themselves. Managed care insurers
are expected to reimburse approximately 45% of all outpatient
prescriptions in 1995, and 70% by the year 2000.

Physicians caring for patients in these plans often face restrictions
for prescribing drugs that are "formulary" approved.
Patients must make a substantial copay for nonformulary prescriptions.

Formulary decisions that traditionally were heavily influenced
by the requests of individual physicians are now shifting to the
managed care organizations' pharmacy and therapeutics (P&T)
committees, which often have a very different set of priorities.
Unlike individual physicians, these P&T committees focus heavily
on costs in their approve/disapprove decisions for new and existing
drugs.

Cost-Effectiveness Analysis

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