The Evolving Use of Cost-Effectiveness Analysis in Formulary Management Within the Department of Veterans Affairs

The Veterans Health Administration (VHA) runs the largest integrated healthcare system in the nation. Formulary management within VHA primarily involves 3 national groups: the Medical Advisory Panel, the Veterans Integrated Service Network Formulary Leaders, and the Pharmacy Benefits Management Strategic Healthcare Group. Together, these groups manage the VHA national drug formulary with a goal of providing a comprehensive, safe, and cost-effective pharmacy benefit for veterans. Traditionally, VHA has relied on cost-minimization analyses in formulary decisions. More recently, VHA has emphasized the use of cost-effectiveness data, especially for newer, costly drugs. In addition to including this data in drug monographs, the VHA has begun requiring formal cost-effectiveness analysis from manufacturers of selected pharmaceuticals. VHA has also requested that clinically relevant information such as quality of life plus mortality benefit be made available from industry so that internal cost analyses can be performed. It is hoped that by setting the expectation that cost-effectiveness will be formally considered in all VHA formulary decisions, the pharmaceutical industry and others will be stimulated to collect and report data that enables these analyses. We believe that if other organizations also place an emphasis on economic evaluations, industry and the public will be more accepting of decisions that incorporate cost considerations.