2018 Formulary Strategy

From 2016 through 2025, health care spending is projected to grow 5.6 percent and prescription drug spending 6.3 percent annually — both at a rate higher than the Gross Domestic Product. Since 2012, when we first began removing certain drugs in favor of clinically appropriate, lower-cost alternatives, formulary management has been foundational to help clients mitigate the impact of rising drug costs.

That continues today. For clients aligned with our Standard Control Formulary, first-quarter per-member-per-month (PMPM) cost was $85.90 compared to $121.12 for those with a Standard Opt-Out Formulary. Generic Dispensing Rate for Standard Control Formulary clients was 86.5 percent compared to 83.8 percent for those on Standard Opt-Out, which does not include formulary removals.*

Since 2012, when we introduced our industry-leading and rigorous approach to formulary management, through 2018, our formulary strategy is expected to deliver $13.4 billion in cumulative savings to pharmacy benefit management clients, through inclusion of lower-cost brands and transition to generics.** CVS Caremark is the largest pharmacy benefit manager in the country, in lives and claims, providing coverage to nearly 90 million plan members. Our range of managed commercial formularies, including Standard Control Formulary, cover more than 31 million members.

Over the years, we have introduced several other innovative strategies to help mitigate the impact of brand drugs coming to market at ever higher prices and escalating costs for existing brand drugs. The latest advance in our cost management strategies are value-based initiatives, which enable much more precise and targeted formulary management by negotiating pricing for specific drugs and conditions rather than at a therapy class level. This helps ensure that reimbursement for a drug is aligned to the value and outcomes it delivers rather than a static, pre-set price.

Value-based management approaches can vary depending on the therapy class and drug. Such strategies include:

	Indication-based pricing and rebates
	Outcomes-based contracting
	Cost cap-based contracting

2018 Standard Control Formulary Removals

CVS Health offers a range of formulary management options that help reduce pharmacy costs for clients and members, while ensuring clinical integrity and access. In addition to expanding our value-based initiatives, effective January 1, 2018 we expect to remove 17 products from our Standard Control Formulary in 10 drug classes.

We remove drugs only when clinically-appropriate, lower-cost (often generic) alternatives are available. Our targeted approach ensures minimum member disruption. For 2018, we estimate 99.76 percent of members will be able to stay on their current therapy. A proactive member and prescriber communication strategy helps members transition to clinically-appropriate medications, minimizing disruption. Every member’s journey is unique and that’s why we take a personalized approach to member outreach. Communications informed by data analysis and predictive modeling, enable us to concentrate our efforts where they are most needed. Our engagement strategies are grounded in research, and we know that better engagement helps improve outcomes as well as member satisfaction.

List of Removals and Updates

Below are the therapy classes with drug removals and updates for the 2018 Standard Control Formulary.

Future Updates

The autoimmune class is a leading trend driver for commercial clients, due primarily to utilization and price. Many drugs are also obtaining a growing number of supplemental indications, making careful management of this therapeutic class critical to helping payors manage the financial impact. In addition, consistent with our policy, as a new specialty product launches all existing products in the class will be re-evaluated to determine appropriate formulary placement and potentially removed or added to formulary. New entrants are expected in the hepatitis C class.

We are in the process of finalizing changes for autoimmune and hepatitis C categories, which will be communicated mid-September.