Formularies

Question 1

Formulary

Answer 1

A formulary is a list of preferred drugs for specific illnesses. It helps healthcare organizations balance quality care with cost savings.

Question 2

Purpose of Formulary

Answer 2

Formularies aim to save money while ensuring quality care. They guide the use of medications beneficial to patients and cost-effective for employers.

Question 3

Formulary System

Answer 3

A formulary system is how organizations choose medicines based on evidence for different health issues and patients.

Question 4

AMCP’s Formulary System

Answer 4

AMCP (Academy of Managed Care Pharmacy):
sees a formulary system as an organization’s approach to selecting medicines based on evidence

Question 5

Components of Formulary Systems

Answer 5

Formulary systems guide which drugs to use and educate doctors for better healthcare choices.

Question 6

Prescribing Guidelines in Formulary Systems

Answer 6

Guidelines in formulary systems suggest trying cheaper but effective drugs before costly alternatives, promoting wise prescription choices.

Question 7

Example of Prescribing Guidelines

Answer 7

Formulary systems might advise starting with a costly drug like Nexium® for a short period, then switching to a more affordable option like omeprazole.

Question 8

Limitations on Therapy in Formulary Systems

Answer 8

Formulary systems may restrict certain drugs or limit treatment duration, like allowing only one course of smoking cessation therapy per patient’s lifetime.

Question 9

A patient brings a prescription for 30 fexofenadine (Allegra®) 180 mg once daily.

The plan’s claims system rejects the prescription, stating “Drug not covered; try formulary alternative.”

What will the patient have to take instead?

Answer 9

An approved drug from the formulary. In this case, the plan requires patients to try and fail with loratadine, an over-the-counter non-sedating antihistamine, before covering fexofenadine.

Pharmacy will have to call the doctor and let them know

Question 10

Counterdetailing

Answer 10

Counterdetailing, or academic detailing, refers to prescriber education programs integrated into formulary guidelines. These programs aim to counteract information provided by pharmaceutical companies and promote the appropriate use of formulary products.

Question 11

Drug Utilization Review (DUR) in Formulary Systems

Answer 11

Drug Utilization Review is a pharmacist-led evaluation of drug therapy either before or after a prescription is dispensed within formulary systems. Insurers often use DUR as a cost-saving measure to ensure the most cost-effective drugs are being prescribed.

Question 12

Prior Authorization (PA) in Formulary Systems

Answer 12

Formulary systems commonly include a process for obtaining prior authorization (PA) from Pharmacy Benefit Managers (PBMs) to use non-formulary medications when medically necessary. This helps control costs and ensures appropriate utilization of non-formulary drugs.

Question 13

Compare a formulary with a formulary system. What is the relationship between these terms? How does a
change to one affect the other?

Answer 13

A formulary is a list of preferred drugs, while a formulary system is the comprehensive process for evaluating, selecting, and managing medications within an organization. The formulary is a component of the formulary system. Changes to the formulary directly impact available drugs, while changes to the formulary system can affect the evaluation process, guidelines, and overall medication management within the organization.

Question 14

When & where did formularies develop?

Answer 14

Formularies originated in hospitals to control inventory investment and ensure the availability of necessary medications.

1920s-1930s

Question 15

Formularies in other fields of medicine:

Answer 15

With the rise of managed care, formularies extended to ambulatory settings. Early HMOs, employing their physicians and pharmacies, simplified drug selection and inventory control.

Question 16

Present day: Formularies

Answer 16

Formularies became the cornerstone of managed care organizations’ drug benefit management.

Employer Adoption: As of 2011, 90% of employers had a formulary for brand medications.

Question 17

Who develops formularies?

Answer 17

formulary is typically developed by a Pharmacy and Therapeutics (P&T) committee associated with healthcare institutions, managed care plans, or pharmacy benefit managers.

Question 18

Factors Considered by P&T Committees

Answer 18

Factors considered include risk vs. benefit, drug interchangeability, patient risk factors, special requirements, patient compliance, patient satisfaction, demand, cost, pharmacoeconomic data, and the manufacturer’s reliability and reputation.

Question 19

Risk vs. Benefit

Answer 19

Evaluates the clinical efficacy and safety compared to other drugs with the same indications.

Question 20

Drug Interchange

Answer 20

: Examines therapeutic substitutes, similarity to existing drugs, and identical indications, dosage forms, and strengths.

Question 21

Patient Risk Factors

Answer 21

Considers side effects, adverse reactions, drug interactions, contraindications, warnings, and precautions.

Question 22

Special Requirements

Answer 22

Assesses issues like liver damage, ocular complications, changes in blood pressure, and the need for special monitoring.

Question 23

Patient Compliance and Satisfaction:

Answer 23

: Considers attributes enhancing compliance, convenience, taste, side effects, and patient preferences.

Question 24

Demand

Answer 24

Evaluates consumer and physician demand, considering requests through prior authorization processes.

Question 25

Cost Factors

Answer 25

Examines cost per dose, cost per day, cost per course of therapy, and cost per member per month for maintenance drugs.

Question 26

Other Costs:

Answer 26

Considers additional costs associated with product use, such as lab tests, physician follow-ups, and potential complications.

Question 27

Timing:

Answer 27

Emphasizes that cost considerations come after clinical data evaluation.

Question 28

Manufacturer Reliability

Answer 28

Evaluates whether the manufacturer can guarantee a reliable supply.

Question 29

Manufacturer Reputation:

Answer 29

Considers the manufacturer’s establishment, reputation, and demonstrated ability to promote formulary compliance.

Question 30

Cost Reduction Strategies in Managed Care Organizations

Answer 30

Focus: Managed care organizations aim to reduce costs for single-source brand-name drugs in addition to promoting generic usage.

Negotiation Strategies: Effective formulary systems negotiate lower prices with pharmaceutical manufacturers, fostering competition among them.

Pharmaceutical Manufacturer Incentives: Manufacturers, vying for preferred formulary status, offer rebates to managed care plans. These rebates are provided in exchange for increased product usage resulting from formulary selection.

Question 31

Rebates and Preferred Formulary Status

Answer 31

Offered Incentives: Pharmaceutical manufacturers provide rebates to secure preferred formulary status.

Expectations: Manufacturers anticipate increased product use due to formulary selection, justifying the discount.

Basis for Rebates: Rebate amounts may be linked to performance metrics (prescribing levels) or market share within a therapeutic class.

Question 32

Factors in Formulary Decisions

Answer 32

While the amount of rebates is crucial, formulary decisions are also influenced by other factors, as discussed in previous contexts.

Question 33

Generic Preference

Answer 33

Formularies typically encourage the use of generic drugs.

Question 34

Reimbursement Strategy

Answer 34

Brand-name coverage under MAC program are allowed when medically necessary.

Question 35

Common DAW Codes:
0 & 1 & 2

Answer 35

0: Substitution permitted
1: Physician requires brand
2: Patient requests brand

Question 36

Can physicians pick DAW codes for vibes?

Answer 36

No. The need for documentation is important to justify the use of DAW codes.

Question 37

What if a doctor says a name-brand is medically necessary & the insurance still won’t approve it?

Answer 37

In such cases, the patient must pay cash for all or part of the prescription at pickup.

Alternative: Alternatively, the physician may need to write a new prescription for a covered product to ensure insurance coverage.

Question 38

Mike requests Norvasc® (amlodipine), and the prescription allows substitution. What code should be used?

Answer 38

DAW-0 (Substitution permitted or no product specified)

Question 39

Mike’s requested brand-name medication may not be covered. What can Mike do?

Answer 39

Pay out of pocket or pharmacy can call the doctor & ask for a new prescription to be covered.

Question 40

Open Formulary:

Answer 40

Few restrictions, mainly MAC limits for generics.

Offers unrestricted choices, favored by patients and providers.

Cost Impact: Generally leads to higher costs than other formulary types.

Question 41

Closed Formulary:

Answer 41

Limited list, usually generics plus 300 to 1,000 brand-name drugs.

NDC Blocks: Used to prevent non-formulary drugs or entire therapeutic categories.

Prior Authorization (PA): Allows non-formulary use under specific circumstances.

Recent Trends: Less common, replaced by multi-tier formularies.

Question 42

Incented Formulary:

Answer 42

Coverage: Includes generics (with MAC limits) and most brand-name drugs.

Tiered Copayment System: Preference given through tiered copayments.

Beneficiary Cost: Shifts more costs to plan beneficiaries.

incented formularies do not prevent access to drug products; they only create incentives to use preferred
products.

Question 43

Two-Tier Copayments (Incented Formularies)

Answer 43

Low copayment for generics (Tier 1), higher for brand-names (Tier 2).

Question 44

Three-Tier Copayments:

Answer 44

Low copayment for generics (Tier 1), higher for preferred brand-names (Tier 2), highest for non-preferred brand-names (Tier 3).
Most common among employers.

Question 45

Four- and Five-Tier Copayments:

Answer 45

Include lifestyle drugs or products with 100% copayment.
Reflect growing complexity in cost-sharing.

Question 46

2011 Takeda Report findings on Incented Formularies

Answer 46

25% of employers used a four-tier plan

Use of coinsurance plans: More common (34% in 2011, up from 14% in 2008).

Copay Differential Increase: Higher between generics and preferred/non-preferred brand-name

Question 47

Common Restrictions of Formularies

Answer 47

Limits on refills, dosage units, and age/gender-based use.

Restrictions on prescribing specific medications to certain specialties.

Examples include growth hormone restricted to endocrinologists and IV chemotherapy limited to oncologists.

Question 48

Positive and Negative Formularies

Answer 48

Positive Formulary:
Closed list covering plan-approved products only.

Advantage: Requires formal approval for new products, aiding cost control.

Negative Formulary:

Closed list listing non-covered products only.

Advantage: Simple, doesn’t need constant revision for new products, offering more therapeutic choices.

Question 49

Prior Authorization Process

Answer 49

Process in closed and incented formularies allowing non-formulary drug use under specific circumstances.

Question 50

Prescriber’s Role in PAs

Answer 50

Must justify drug superiority over formulary options and obtain PBM authorization before dispensing.

Question 51

Pharmacy Actions:

Answer 51

May need to contact prescriber and/or PBM for proper authorization before dispensing.

Question 52

Examples Requiring Prior Authorization

Answer 52

High-cost injectables like Lupron® or growth hormone.

Off-label drug use.

Non-formulary brand-name products.

Drugs prone to abuse.

Medications for unconventional purposes.

Early refills (e.g., vacation supply).

Question 53

Other Restrictions and Administrative Aspects

Answer 53

Prescriber Contact: Some prescribers may contact PBM to explain non-formulary prescriptions.

PA Process Variation: Varies among PBMs; may involve web requests, calls to help desk, or TAR submissions.

Authorization Methods: PBMs may adjust computers, issue codes, or require prior approval numbers.

Question 54

Treatment Authorization Request (TAR)

Answer 54

A form filed for prior authorization, containing patient, pharmacy, physician, medication, and justification details.

Often needed for non-formulary medications, failed formulary trials, or state Medicaid plan limits.

State Medicaid Limits: Some plans limit monthly prescriptions per patient; TAR used if exceeding limits.

Question 55

Example Scenario with Prior Authorization

Answer 55

Patient presents Pancrease® prescription with DAW, plan rejects due to no reimbursement for brand.

Contact physician for approval of generic, but physician prefers brand for desired outcome.

Next Step: Contact PBM for prior authorization to dispense brand-name Pancrease®.

Question 56

Formulary Incentives - Physician Report Cards

Answer 56

Bonuses for good performance, sanctions for poor performance (e.g., reduced reimbursement).

Reporting: PBMs use periodic performance reports, often termed “report cards.”

Metrics: Include prescriptions per patient, prescription cost, generic prescription percentage, and formulary compliance.

Effectiveness: Used in academic detailing programs and retrospective DUR to modify prescribing habits.

Question 57

Pharmacy Incentives in Formularies

Answer 57

Encourage pharmacies to align with formulary goals and reduce drug costs.

Financial Impact: Dispensing expensive products may yield more profit for the pharmacy.

Examples of Pharmacy Incentives:

Additional reimbursement for using less expensive products and generics.

Network exclusion for poor performance.

MAC program: Encourages lower-cost generic use over brand-name drugs.

Question 58

Patient Incentives in Formularies

Answer 58

Common Incentive: Tiered copayments.

Additional Method: “Co-insurance” where patients pay a percentage of the total cost

This helps sensitize patients to the actual cost of drug therapy.

Question 59

Pharmacist’s Role in Formularies

Answer 59

Authorizing the use of generic equivalents.

Explaining the use of generic equivalents to save money.

Requesting prescriber’s permission for lower-cost therapeutic equivalents.