Pharmacy Benefits Uncut

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Most employers and the PBMs charged with managing their pharmacy benefits rely on the FDA’s regulatory decisions when evaluating drugs for inclusion in their formularies.

It’s easy, and quite frankly logical, to assume that drugs approved by the FDA are better (more effective and safer) than drugs currently on the market. But when you take a closer look at how the FDA approves drugs, that’s often not the case. And as an employer contending with ever-increasing pharmacy spend you need to know how the FDA makes its decisions and how you should (and shouldn’t) interpret them when managing your own drug formulary.

So today I'm going to debunk five myths about the FDA to help you make sure you’re getting value for your pharmacy spend.

I’ll also share some key strategies you can use as a starting point for critically evaluating the FDA’s decisions and applying them to your own drug formulary.

Let’s dive in.

Myth 1: Drugs approved by the FDA are effective

This seems like a reasonable assumption. Newly approved drugs should be evaluated based on whether they work, right?

​Well think again. While the FDA reviews evidence on drug quality, safety, and effectiveness, it DOES NOT require concrete results from clinical studies demonstrating the benefits of a drug to approve it for use in the general population. It simply has to believe its benefits outweigh its harms. This means many of the drugs the FDA approves are no more effective or even equally effective to currently available drugs.

You may be surprised by this, but many folks in the healthcare space don’t know how the FDA makes its decisions. A study from several years ago revealed that 73% of physicians, when presented with three multiple choice questions about the FDA approval process, answered two or all three of the questions incorrectly. This very likely means that your PBM and other vendors who help manage your pharmacy benefits plan also don’t understand how the FDA approves drugs.

As an employer you should be concerned about this lack understanding since it likely means their ability to appropriately interpret FDA decisions and apply them to managing your formulary is suboptimal. For example, these misconceptions could lead to recommendations to include drugs that are no more effective and considerably more expensive than existing medications that your plan members already have access to.

Bottom line: you can’t rely on the FDA to make decisions related to managing your drug formulary. You need to an independent expert to ensure you’re only including drugs on your formulary which provide real clinical benefits over and above lower-cost alternatives.

Myth 2: Drugs approved by the FDA are safe

Because the FDA is supposed to only approve drugs whose benefits outweigh its harms, it would stand to reason that the drugs it approves would be safe.

But hold on a minute. Many drugs approved by the FDA go on to demonstrate safety problems post-approval.

More the 30% of the drugs (71 of 222) the FDA approved between 2001 and 2010 were withdrawn from the market, required a “black box” warning about safety, or required a safety announcement about newly discovered risks.

These safety actions by the FDA are often taken many years after a drug’s approval. One study found the median time to safety actions by the FDA is 4.2 years after drug approval. This means that many patients could potentially be exposed to the harmful effects of a drug for a considerable amount of time before they or their healthcare providers are aware of any safety concerns.

Bottom line: again, just as with effectiveness, employers cannot rely on FDA approvals to guarantee drugs are safe. Be sure to independently evaluate the clinical value of new drugs for inclusion on your formulary and make sure you aren’t needlessly exposing your plan members to adverse effects from drugs that may not be providing any clinical benefits over and above existing therapies.

Myth 3: The FDA’s uses robust evidence when making its decisions

The FDA typically reviews multiple studies on each drug it evaluates for approval.

But not lately. The 21^st Century Cures Act, which came into effect in 2017, granted the FDA increased flexibility when interpreting evidence used for the approval of new drugs and since then the number of drugs approved based on a single study has skyrocketed.

The FDA approved 37 drugs in 2022 and 24 of these approvals (65%) were based on a single study. This compares to 2016 when only 20% of FDA approvals were based on a single study.

These findings point to a recent trend towards less rigorous FDA processes for drug approvals since passage of this act. This development is worrying since it means more and more drugs whose effectiveness and safety is uncertain are reaching the market and putting a greater onus on providers and their patients when making important treatment decisions.

Bottom line: Many drugs whose true benefits are unknown are being brought to market. Just because a drug has been approved by the FDA does not mean that you need to include it on your formulary. Consider providing access to alternative therapies whose benefits are backed by robust evidence.

Myth 4: The FDA designates drugs that are superior to existing treatments as “Breakthrough Therapies”

The FDA can designate a drug as a “breakthrough therapy” if preliminary clinical evidence suggests it provides an improvement over existing therapeutic options, and the agency regularly uses this term in its media releases and prescribing resources.

But hold on. Strong evidence is not required by the FDA to designate a therapy as a "breakthrough". This designation can be made based on uncontrolled studies or surrogate outcomes. For example, a cancer drug that has demonstrated a reduction in tumor size but no improvement in survival (the goal of every cancer therapy) can be designated as a “breakthrough therapy”.

Many physicians (and likely vendors who help manage your drug formulary) interpret “breakthrough” status of a drug overly optimistically and are more likely to prescribe these drugs compared to drugs that are equally effective but not designated as breakthrough therapies. Furthermore, they don’t appreciate that rigorous evidence is not required to support this designation. This can again lead to biased formulary listing decisions and wasteful spending on therapies that may not necessarily provide meaningful improvements over existing drugs.

Bottom line: Using superlatives such as “breakthrough” to describe drugs increases providers’ beliefs in the effectiveness of these therapies, which may not be backed up by robust evidence. Focus on the evidence and be aware that potentially subjective descriptions of a drug’s benefits can lead to biased decisions.

Myth 5: The FDA operates independently from the pharmaceutical industry

The FDA is charged with regulating products developed by the pharmaceutical industry and therefore should operate independently from it.

Not so fast. The FDA requires drug companies, the very entities it’s supposed to regulate, to pay a user fee each time they file an application for approval of a new drug. In fact, the FDA is so reliant on funding from the pharmaceutical industry that this funding now makes up three-quarters of the agency’s drug division budget.

Needless to say, this financial arrangement leads to concerns about whether the FDA is a truly an independent arbiter of judgements about the drugs it approves. Some critics have argued that this funding model makes the FDA is beholden to the pharmaceutical industry. Other concerns include decreased regulatory standards, shortened approval timelines, and too much industry involvement in the FDA’s decisions, practices which are harmful to patients.

And it’s not just direct industry funding that has raised concerns about the FDA’s independence. Many of the studies used as evidence in the drug approval process are also industry funded. In fact, in 2022, 79% of studies used to approve drugs by the agency were industry-sponsored.

Bottom line: FDA decisions may be influenced by the pharmaceutical industry because of financial relationships and reliance on industry-generated evidence. Again, the key is to conduct an unbiased assessment of a drug’s effectiveness and safety to ensure your drug formulary decisions are evidence-based.

Key strategies

Here’s how you can critically evaluate the FDA’s decisions in the context of managing your drug formulary.

1. Just because the FDA approves a drug, does not mean you need to include it on your formulary.

2. Work with an independent expert to objectively assess evidence on a drug’s effectiveness and safety before listing it on your formulary.

3. Revisit your formulary listing decisions as more information on a drug becomes available.

4. Don’t believe the hype – descriptions such as “breakthrough” mean nothing in terms of a drug’s real effectiveness.

By understanding how the FDA works, what its decisions represent, and how to interpret them, you’re well positioned as an employer to ensure drugs listed on your formulary provide optimal clinical value for your plan members.

That’s all for this week.

See you in two weeks,

Nina