Formulary

Tiered Formularies

Most formularies are divided into tiers for reimbursement and copayment. Many programs use a three- or four-tiered program with generic substitutes requiring the lowest copayment, preferred drugs without accepted substitutes have a somewhat higher copayment, whereas nonpreferred drugs and branded drugs for which a substitute is available but not dispensed carry a much higher copayment. The fourth tier involves denial of payment because the drug is not medically necessary or not covered for some other reason without prior approval.

Controversies

Formularies are becoming increasingly controversial as managed care pharmacy benefits management covers more transactions, and there is increasing litigation as exclusion becomes more critical to the pharmaceutical manufacturer's profitability. Recently, litigation has centered on the efforts of states and other payers to use inclusion or exclusion in a health plan's formulary as a bargaining chip in negotiating price discounts. The individual states play a major role here because Medicaid programs do carry drug benefits, and the states have become increasingly aggressive trying to control drug costs.

Those who make formulary decisions should consider more than cost. The dominant membership of the P&T committee is usually physicians and pharmacists with representatives from nursing, other relevant professions, administration, and occasionally lay health plan members. The primary objective should be to provide the most cost-effective care for the patient, so efficacy and effectiveness are major concerns. Where more than one treatment is available, the committee must consider the comparative effectiveness of the contenders. As substitutes become available, it is important to consider equivalency based on pharmacologic, pharmacokinetic, pharmacoeconomic, and safety information. Efficacy data are typically available from studies submitted to the Food and Drug Administration for drug approval. Where possible, these are based on double-blind randomized controlled experiments. However, these experiments do not always approximate the way the approved drug performs under less controlled clinical conditions. Therefore, some argue that the P&T standard should be use effectiveness, which takes into account patient compliance and adherence and revealed preferences of physicians and patients. A number of guidelines are available for P&T committees to use in requesting and interpreting clinical and economic information from vendors. One widely used one is available from the Academy of Managed Care Pharmacy.

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