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Background: The Academy of Managed Care Pharmacy has recently created guidelines for the submission of pharmacoeconomic models. Although these guidelines provide a general framework for the integration of pharmacoeconomic models in the drug selection process, amore disease-specific and practical ‘hands-on’ approach is needed for pharmacy staff and Pharmacy and Therapeutics (P&T) committee members. Objective: To answer the question, ‘How can pharmacoeconomic models comparing treatments for diabetes and its complications be evaluated and used to make more informed formulary decisions?’ Methods: We determined the information needs of a managed care organisation (MCO) making coverage decisions for diabetes therapies and reviewed current guidelines for the submission of pharmacoeconomic models to MCOs. We then developed a set of practical questions for evaluating models of diabetes treatment in a managed-care environment. Results: Information needed by P&T committees in relation to new diabetes medications includes the long-term benefits of reduced micro- and macrovascular complications and changes in drug utilisation patterns, in addition to the immediate drug budget impact. Because diabetes is a complex disease, the peer-review process should be relied on as a first step to help ensure the validity of a model. Then, the end-user of a model should evaluate (i) the sources of data to inform the model, (ii) the generalisability of the model for an MCO population, and (iii) the face validity of the assumptions of the model. Conclusion: Pharmacoeconomic models in diabetes offer potential for assisting P&T committee members in making more informed decisions. The guidelines presented here provide a practical approach for model assessment. However, additional expertise will be needed by MCOs to appropriately evaluate these models, and joint educational programmes between managed care, academia, and industry should be considered as a mechanism for improving technology assessment in diabetes care.

From 1 January 1999, all requests by pharmaceutical manufacturers and others to Blue Cross and Blue Shield (BCBS) of Colorado and Nevada for the listing of new pharmaceutical products or any proposed change to the formulary status of an existing product must be accompanied by a submission which meets the informational and analytical standards set out in the BCBS Guidelines for Formulary Submissions for Pharmaceutical Product Evaluation. These submission requirements relate both to the anticipated therapeutic impact of a new product and to claims made as to its anticipated pharmacoeconomic impact. The guidelines have been developed because BCBS is concerned that decisions to admit a drug to formulary have been based in the past on incomplete information. In order to rectify this situation (and to meet quality control objectives), it has been decided that all submissions to BCBS should meet a common information standard that describes both the characteristics of the product and its expected impact in a disease or therapeutic area. Unlike guidelines that have been introduced in countries such as Australia and the Canadian Province of Ontario, these guidelines take an explicit systems approach to the case a manufacturer must make before a product is considered for formulary listing. While the notion of systems impact requirements is not new, this is the first time that a managed healthcare system in the US has adopted this explicit perspective and notified manufacturers that traditional pharmacoeconomic evaluations may not meet the information needs of drug purchasers. The purpose of this paper is to describe the BCBS formulary guidelines and to demonstrate how manufacturers are expected to meet the information needs of a systems impact perspective in submissions to the pharmacy and therapeutics committee.

Traditionally, pharmacy and therapeutics (P&T) committees have been responsible for overseeing the drug use process, using formulary systems to control drug costs. Primarily, these committees act in an advisory capacity as policy-recommending bodies within healthcare systems, for the specific purpose of promoting rational drug therapy. Methodologies utilised by these committees include drug use evaluation, medical staff education, continuous quality improvement, formulary restriction and therapeutic interchange. Future roles of P&T committees will include the evaluation of clinical outcomes information, including quality-of-life issues, to establish policies governing the use of drugs at all levels and in all types of healthcare.

The goal of a health maintenance organisation (HMO) is to provide high quality, cost-effective healthcare services and products which meet the needs of the membership. Providing and managing pharmaceutical products and services within the HMO is a major aspect of accomplishing this goal. Several decisions must be made in developing, implementing and maintaining a formulary system. The numbers of people seeking their healthcare from HMOs in the US has increased 4-fold in 10 years, and several model types of HMOs have developed, including network HMOs, group HMOs, independent practitioner associations and staff models. HMOs utilising formulary systems provided cover to 76% of enrollees in 1992. Formulary system management and decision making entails the use of open vs closed formularies and the role of the pharmacy and therapeutics (PT) committee. Product selection takes into account efficacy, safety, costs, patient acceptance, ease of use, dosage forms, preparation requirements, stability and storage requirements and the reputation of the manufacturer and the service it provides. We list and describe various policy decisions which HMO pharmaceutical decision makers must address if the formulary system is to become an efficient tool for the HMO.

The US pharmaceutical industry is heavily and appropriately regulated by the Food and Drug Administration (FDA) regarding the safety and efficacy of new and generic drug approvals, and phannaceutical promotional and marketing practices. However, the US is one of the last major countries without government price controls. Comparisons between the US and Canada or western Europe are inappropriate, because in the US the majority of the population receive healthcare from private insurance, as opposed to govemmentsponsored programmes in the other countries. The pharmaceutical market in the US is moving away from a fee-for-service model, where pharmaceutical manufacturers target prescribers who have had autonomous decision-making power over selection of drugs. Under the growing managed care model, the plan pharmacy and therapeutics committees make drug coverage decisions for participating staff or community physicians. The physicians recei ve negati ve reinforcement when they prescribe non-formulary drugs, and positive reinforcement to prescribe covered medications. They are unable to separate prescribing practices for managed care and their dwindling private-pay population, and soon begin writing plan fonnulary drugs for all patients. Thus, the influence of managed care formularies goes beyond the directly covered plan membership as a result of this 'spill-over' effect. Although this is difficult to measure, it has been estimated that an enforced managed care drug prescription can influence an average 2.7 additional prescriptions in highly prescribed therapeutic categories (M.Z. Holubiak, personal communication). In the past decade, managed care membership has flourished in the US, and now represents over 80 million in health maintenance organisations (HMOs) and preferred provider organisations (PPOs). This trend suggests thai by the year 2000, most ofthe insured US population may be covered by a managed care healthcare plan. National healthcare analysts, encouraged by President Clinton's 'managed competition' theme, believe a migration of state Medicaid and federal Medicare members into managed care will also increase the growth of managed care.

This article reviews and describes the formulary decision-making process in an academic medical centre. The pharmacy and therapeutics (PT) committee is the organisational nucleus of the drug use control process in the institutional environment. Thomas Jefferson University Hospital (TJUH), a 720-bed academic medical centre in an urban locality in the US, is used as a model representative of how most of these committees function. Survey responses collected from 29 peer academic medical centres are presented to compare and contrast the structure and function of the PT committee at TJUH with corresponding procedures in other university hospitals in the US. TJUH is typical of the institutions which comprise the University Hospital Consortium (UHC). The PT committee of TJUH is composed of 29 members, meets once per month for 10 months of the year, and has a network of 13 subcommittees. TJUH has an intermediately controlled (mixed) formulary, and uses both restricted drugs and treatment guidelines. Of the 29 UHC member institutions responding to the survey, the average PT membership is 18, the average meeting frequency is 11 times per year, and 83% of these committees have a network of subcommittees. None describe their formulary system as open, 86% have a closed formulary and 14% have a mixed formulary system. There is a restricted drug programme in 76% of the institutions, 79% utilise treatment guidelines, 76% practice therapeutic interchange and all employ generic substitution. Specific areas addressed in this review include the history of the formulary system, the structure and function of the PT committee, types of formularies, cost containment and the formulary decision-making process, the impact of organisational culture on physician decision making, the role of the pharmacy department, the role of pharmaceutical sales representatives and their impact on prescribing habits, the impact of the Joint Commission on Accreditation of Healthcare Organisations (JCAHO) Agenda for Change on the formulary process, and future challenges.

In 1992, Lipsey[1] provided a review of institutional drug formularies and the relevance of pharmacoeconomic analyses in drug formulary decisions. The past 5 or 6 years have seen considerable work in the development of guidelines for pharmacoeconomic evaluations, and growth in the use and applications of pharmacoeconomic evaluations. Such growth has given cause for a reassessment of the relevance of pharmacoeconomic analyses in formulary decision-making. We believe that pharmacoeconomic analyses are as necessary now as in 1992 when Lipsey[1] provided his review. However, we also believe that pharmacoeconomic analyses are not the ‘be-all and end-all’ in the formulary decision-making process. Evidence on the safety, efficacy and, ultimately, the effectiveness of drugs is always important; these 3 factors are important prerequisites for formulary inclusion. The relevance of any one particular pharmacoeconomic evaluation will depend on the context of the formulary decision process, and the data available at the time of the decision. In this regard, it is important to consider a number of factors including the goals decision-makers are faced with. Depending on the incentive structure of the pharmacy and therapeutics (P&T) and formulary committees at different levels (e.g. institutional, regional, national), the decision-making goals may differ and therefore, the required information and the perspective of the evaluation may differ. Another important determinant of the relevance of pharmacoeconomic evaluations will be the degree of accountability for claims made within a pharmacoeconomic evaluation. The purpose of this article is to review some of the above issues as they relate to, and impact on, the use of pharmacoeconomic analyses in formulary decisions. We discuss some points initially raised by Lipsey,[1] and add to the discussion important implications of the role of pharmacoeconomic analyses as seen in recent literature and experiences in the formulary decision-making process. Through these points, we will attempt to show that, while economic evaluations of pharmaceuticals will continue to be relevant in this process, there are several important elements that will determine to what extent pharmacoeconomic information may impact the final decision.