Because novel drug therapies target a previously unmet clinical need or help significantly advance patient care and public health, many enter today’s highly complex pharmaceutical marketplace at extremely high price points. In 2019, FDA’s Center for Drug Evaluation and Research (CDER) approved 48 novel drugs, endorsed as New Molecular Entities (NMEs) under New Drug Applications (NDAs) or as new therapeutic biologics under New Biologic License Applications (BLAs).1
The overall number of approvals has significantly increased over the past decade (see FIGURE 1).2 Interestingly, these approvals have been supported by fewer pivotal trials with less rigorous study design.3 Resulting from the inception of the FDA Fast Track designation in 1988, a number of other streamlined pathways of regulatory approval have surfaced, such as Priority Review (1992), Accelerated Approval (1992), and Breakthrough Therapy Designation (2012).3 These facilitated pathways offer the FDA flexibility with respect to evidentiary requirements; however, less rigorously designed trials suggest an ongoing need for continued evaluation of therapeutic safety and efficacy after approval.3
In an age of high-priced drugs, medication evaluation models should align a drug’s price to the efficacy and clinical outcomes it provides. Health care stakeholders must now focus on the concept of value-based drug purchasing models, in which the price of a medicine is directly linked to the value it provides to patients, payors, and the health care system.4 Since 2016, the University of Virginia (UVA) Health’s Novel Therapy Subcommittee has evaluated the value of novel therapies relative to their costs (see SIDEBAR 1 for UVA’s process for adding a drug to formulary).
Establishing the Novel Therapy Subcommittee
The Novel Therapy Subcommittee was established at UVA Health to ensure new pharmaceuticals are evaluated appropriately from a financial and resource utilization perspective (see TABLE 1). This subcommittee evaluates the financial and operational impact of adding a high-cost, novel therapy to formulary and is essential in ensuring that the financial investment in the proposed therapy corresponds with UVA’s mission and vision, as well as strategic growth areas. Crucial considerations for evaluation include pharmaceutical expense, labor utilization and requests, specialty pharmacy pathways, billing methodologies, payor relationships and contracting, and other factors as applicable.
The Novel Therapy Subcommittee conducts targeted discussions on high-cost therapies meeting any of the following criteria:
Examples of therapies evaluated by the Novel Therapy Subcommittee include chimeric antigen receptor therapy (CAR-T) and high-cost inpatient infusion therapy (see SIDEBAR 2).
The review by the Novel Therapy Subcommittee is guided by a financial model that incorporates best estimates of how the drug may be utilized at UVA. This process begins with estimating the patient volume and identifying the patient population, followed by a calculation of payor mix and potential reimbursement. Additional expenses and extra resource allocations associated with the therapy are evaluated as well. This combination results in a final net impact to the organization. Key components of the financial analysis of a novel therapy include the following:
The financial model incorporates the impact of each of these considerations as it applies to the novel therapy being reviewed. The goal is to project the most likely financial outcome for the organization should the P&T Committee approve the use of the therapy.
The Novel Therapy Subcommittee chooses to recommend or deny products for formulary inclusion based on the financial model as well as operational considerations. In many cases, the subcommittee will recommend a novel therapy be added to formulary, but with additional restrictions. For example:
Additionally, the subcommittee may request a retrospective review of the financial impact of any therapy that has been evaluated and approved. This serves to measure the accuracy of the initial predictions and to make adjustments as needed. Retrospective reviews are conducted 6 to 12 months post-implementation to ensure the data captures a sufficient number of patients receiving the therapy.
The global COVID-19 pandemic and its resulting economic effects have forced health care systems to scrutinize all expenditures, including prescription medication costs, which account for a significant percentage of UVA’s total health care spending. The operational and financial review of a high-cost, novel therapy agent is a complex process. When evaluating requests for these therapies, they must be reviewed relative to the efficacy and clinical outcomes provided, or their perceived value. An institution with an emphasis on value-based medicine improves the quality of patient care overall by ensuring health care resources are used efficiently.8
Physician and key leadership buy-in play an instrumental role in the practice of value-based care. Since its implementation in 2016 at UVA, the Novel Therapy Subcommittee has continued to assist the medical center in navigating the financial and operational considerations of novel therapies to ensure alignment with our organization’s mission and strategic goals.
Danielle Griggs, PharmD, MBA, MS, BCPS, is the pharmacy director for business services at the University of Virginia Medical Center in Charlottesville, Virginia. She completed her PharmD and MBA at the University of Kentucky, and her MS from the University of North Carolina Eshelman School of Pharmacy. Danielle completed a health system pharmacy administration residency training at UNC Hospitals and Clinics. Her professional interests include pharmacy contracting and negotiations, supply chain and 340B, and pharmacy business development.
Kaylyn Dougherty, PharmD, MHIIM, is a medication utilization strategy pharmacist at the University of Virginia Medical Center. She completed her PharmD and MHIIM at the University of Tennessee College of Pharmacy. Kaylyn also completed residency training in managed care at the University of Michigan and in drug information at the University of Wisconsin Hospital and Clinics. Her professional interests include formulary design, utilization management, drug shortages, and clinical decision support.
Adding a Drug to Formulary
The University of Virginia (UVA) Medical Center pharmacy operates on a closed formulary system: Every medication used to treat a patient in the medical center must be approved by the medical center P&T Committee prior to use. The use of a non-formulary medication must undergo a thorough assessment by a clinical pharmacist prior to approval and procurement.
An attending physician seeking to have a non-formulary medication placed on the formulary, a new formulation of a current formulary medication placed on the formulary, or to amend the restriction of a current formulary medication must complete and submit a request to the Medication Utilization Strategy pharmacy team through an online portal. The addition request form requires the physician to indicate the proposed care setting(s) for use, proposed restrictions for use, estimated usage per month, comparable formulary drugs, reasons for formulary consideration including cited literature, and potential conflicts of interest. The requesting physician must also notify the service line division head of their pending request. The medication utilization strategy pharmacist then prepares an impartial, comprehensive evaluation of the drug based on a review of published clinical trials, efficacy, safety, monitoring, financial impact, etc.
If appropriate, the request may require approval by a specialized subcommittee prior to final review by the P&T Committee. Active UVA subcommittees include Anticoagulation, Infectious Disease, Pain and Palliative Care, and Hematology and Oncology.
Examples of Therapies Evaluated by the UVA Novel Therapy Subcommittee
High-Cost Inpatient Infusion Therapy