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National Formulary A Plus for VA; Better Data Needed, Says New Report

Nancy Tarleton Landis

The Department of Veterans Affairs (VA) national formulary is not overly restrictive, and its effects on quality are likely comparable to those of formularies in private and other public sector programs, a committee of the Institute of Medicine (IOM) concluded. Nearly $100 million in pharmacy expenditures was saved in the two years after implementation of the formulary in 1997, the committee estimated, but VA data relating use of the formulary system to the process and outcomes of veterans' care are almost nonexistent.

Concerns about the formulary's restrictiveness, effects on quality of care and costs, and comparability to other formulary systems were expressed in congressional committees appropriating 1999 funds for the VA. This led to studies by both the IOM and the General Accounting Office (GAO), despite VA pharmacy efforts to consolidate the two. GAO issued a report in December 1999 (see February 1, 2000, News [PDF]) and is expected to complete its audit soon. The IOM report is available at

The IOM committee studied aggregate monthly outpatient drug use by VA region for 1994 through 1999 for six closed or preferred drug classes and eight classes that remained open. The formulary was associated with substantial changes in utilization, prices, and market share of drugs in closed and preferred classes compared with those in open classes. The estimated savings of $100 million is about 15% of VA expenditures for drugs in the six closed or preferred classes. Volume commitments for drugs in the restricted classes have resulted in price reductions by manufacturers of 16-41%. 

An "exploratory" analysis of inpatient discharges for conditions likely to be affected by changes in treatment with drugs in closed classes found no increase in hospitalizations for those conditions. 

Although the IOM committee found that the VA formulary compares "somewhat favorably" to private-sector and Medicaid formulary systems, it made several recommendations for better formulary management: 

  1. Abandon the requirement that a drug not be admitted to the national formulary until it has been marketed in the United States for one year. 
  2. To curtail divergence or inconsistencies among regional and local formularies, adopt a more uniform national approach. In one instance, the study showed, a new drug was added to more than 80% of the regional formularies but rejected for the national formulary. The report said VA should institute a policy on the frequency and number of changes in long-term drug therapy that can result from formulary or contract changes and should improve documentation of exceptions (the "nonformulary process"). 
  3. Improve formulary acceptance by "stakeholders"—especially physicians—in part by increasing physician representation on formulary committees. According to the report, regional formulary committees average 52% pharmacists and 44% physicians, and this "could be perceived to favor pharmacy budget priorities over prescriber views on medical factors in drug treatment."

The committee said the VA needs improved data collection to (1) demonstrate the effects of the formulary on the quality of care, (2) provide managers with detailed information on system functions such as the nonformulary process and restrictions and their effects, and (3) track adverse drug events and drug-use review findings.