Formulary Management

Formulary Management

Ensuring appropriate drug treatment plans without excessively high costs.

Premium Formulary

Our Premium Formulary is a three-tier partially-closed formulary with a minimum copayment differential of $10 between tiers.

  • Tier 1 includes all generics.
  • Tier 2 consists of mid-range, commonly used brand drugs, also known as preferred brand drugs.
  • Tier 3 consists of higher cost brand drugs, also known as non-preferred brand drugs. All specialty drugs, including injectable drugs, are tiered based on our specialty drug list.

Members continue to have access to clinically appropriate treatments through use of lower-cost brand, generic, and over-the-counter alternatives. By excluding certain prescription drugs, we negotiate more aggressive discounts or higher rebates for drugs intended to treat the same condition. This provides a lower overall net cost for your company and maintains affordable options for your members.

Our Premium Formulary also encourages members to use lower-cost alternatives through exclusion of 76 drugs across 25 therapeutic classes.

We offer Prior Authorization (PA) programs for the following four specialty therapeutic classes:

Therapeutic ClassPreferred Medications
Hepatitis CHarvoni, Sovaldi
ImmunomodulatorsCimzia, Humira, Simponi, Stelara
Multiple SclerosisAvonex, Copaxone, Plegridy, Tecfidera
High CholesterolPraluent (PCSK-9 inhibitor)

Select Formulary

Our Select Formulary is a three-tier open formulary with a minimum copayment differential of $10 between tiers. The types of drugs included in each tier are the same as with the Premium Formulary. Also, all specialty drugs, including injectable drugs, are tiered based on our specialty drug list.

Generic-Centric Formulary

Our Generic-Centric Formulary is a two-tier closed formulary and our most aggressive offering, which limits coverage primarily to generic drugs. In classes where there are few, if any, clinically effective generics, preferred brand drugs are included. Non-preferred drugs are excluded.

What is a drug formulary?

Most patients first encounter a drug formulary as a list of drugs that are or are not covered by their particular pharmacy insurance plan.

As William N. Jones, MS, RPh writes in “Formularies, costs and quality of care,” published by the Neurology Clinical Practice journal, “Drug formularies have existed since the 1940s. The formulary in any health system is not a static list of drugs; it is not a “light switch” or a “yes” and “no” system.”

The formulary is part of a system for quality drug therapy within a wider insurance system. Drugs are added and removed when appropriate and needed by healthcare providers and patients and after passing formulary review.

What is formulary management?

Formulary management is an integrated patient care process which enables physicians, pharmacists and other health care professionals to work together to promote clinically sound, cost-effective medication therapy and positive therapeutic outcomes.

The Academy of Managed Care Pharmacy (AMCP) notes that building and managing a formulary is complex: “A formulary system includes the methodology an organization uses to evaluate clinical and medical literature and the approach for selecting medications for different diseases, conditions and patients. Policies and procedures for the procuring, dispensing, administering and appropriate utilization of medications are also included in the system.”

Is formulary management driven primarily by cost?

Cost is one of the factors considered in formulary management, but not necessarily the primary factor.

According to AMCP, “A drug formulary, or preferred drug list, is a continually updated list of medications and related products supported by current evidence-based medicine, judgment of physicians, pharmacists and other experts in the diagnosis and treatment of disease and preservation of health. The primary purpose of the formulary is to encourage the use of safe, effective and most affordable medications.”

Ultimately, cost does come into play. According to William Jones, “When 2 drugs are very similar in efficacy and safety, cost should be the deciding factor.”

What types of formularies are there?

There are many types of formularies on the market, but they often fall into three basic types, as reported by Pharmaceutical Care Management Association:

  • Open formulary: The plan sponsor pays a portion of the cost for all drugs, regardless of formulary status. Although, a plan sponsor may choose to exclude certain products, such as ‘lifestyle’ drugs, from coverage.
  • Closed formulary: The plan sponsor will only cover drugs listed on the formulary. Non-formulary drugs are not covered unless approved through a formulary override process.
  • Tiered formulary: Plan sponsors offer different copays or other financial incentives to encourage participants to use preferred formulary drugs, but will still pay a portion of the cost of the non-preferred drug. For example, when a plan sponsor offers a three-tier benefit design, it may cover non-preferred, non-formulary products on its third tier with a higher copay.

Do drug formularies cut costs for insurance companies only?

Drug formularies reduce costs across the board. Patient costs are contained, sponsoring company costs are contained and insurance company costs are contained.

The Pharmaceutical Care Management Association details how this works:

“Effective use of formularies can minimize overall medical costs, improve patient access to more affordable care, and provide patients an improved quality of life. With less effective, higher-cost drugs routinely being replaced on formularies by more effective and affordable drugs, patients may have fewer office visits, improved outcomes, and lower out-of-pocket costs.

“An effective formulary strategy, used in concert with other cost mitigation programs, can yield significant savings for plan sponsors and patients, while still preserving access to medication.

“PBMs will use a variety of techniques to encourage use of the preferred formulary drugs. The most effective tool for achieving formulary compliance is through benefit structure or plan design where preferred drugs have lower enrollee cost-sharing.”