Formularies and PBMS

What is a formulary?

In its simplest form, a formulary is a list

A medication formulary is a list of preferred medications. The list of drugs in the formulary changes based on new evidence-based medicine, medical decision-making by physicians, pharmacists, and physicians.

A formulary is dynamic

According to the AMCP (Academy of Managed Care Pharmacy), a formulary is not static, it is dynamic. Due to the dynamic nature of drug research and development, formulary listings are dynamic. AMCP describes a formulary as follows:

"...An ongoing process by which a health care organization, through its physicians, pharmacists, and other health care professionals, establishes policies on the use of pharmaceuticals and therapies and identifies pharmaceuticals and the most medically appropriate and cost-effective therapies to serve the health interests of a particular patient.

Understanding formulary drugs and off-formulary drugs (also called off-formulary drugs) is as simple as looking at a current formulary list or as complex as some of the topics below. I will summarize a few points for you below.

formulary listings are governed by policy, not medical code

Formularies are not based on billing codes. Instead, the drugs chosen to be offered by a health plan (also called "payer") are the drugs that have been selected by a group of independent medical experts in a pharmacy and therapy (P&T) team on the evidence base of drug efficacy and price. . . HCPCS codes apply when a doctor administers the drug, but do not apply when the patient self-administers the drug and does not claim insurance to cover the cost.

Reading formulary lists

Sometimes the symbols on the formulary are used to refer to the following meanings:

C = covered,
EXCL = drug excluded
NF = Not included in the formulary
NP = Not preferred
NR = Non-refundable
ONC = Oncology Program
P = preferred PDL
PA = Prior Authorization
PDL = DHS Preferred Drug List
PX = Preferred at level X, where X indicates a more preferred drug or supply. This will display as "P24" for a level 24 medicine or supply. Higher numbers indicate a higher preference.
QL = Quantity Limit, Age = Age Edit
SP = Specialty drug,
ST = Step Therapy
U = unknown formulary status

NOTE: These are examples. formulary lists, symbols, and codes typically vary by PBM and payer.

Formularies should serve multiple purposes

Formularies should if properly structured, serve several purposes, including:

encourage the use of safe and effective drugs based on clinical guidelines

cost control and use of insurance

What is a PBM?

Pharmacy benefit managers (PBMs) typically negotiate discounts and rebates with pharmaceutical manufacturers on behalf of their clients (insurers, employer groups, and other payers) to create and manage prescription drug formularies.

Who are the biggest PBMs?

The PBM market is highly consolidated, with only 3 PBMs (CVS Caremark, Express Scripts, and OptumRx) managing pharmacy benefits for approximately 256 million Americans. In 2019, these 3 PBMs handled 74% of all prescriptions processed in the United States.

What influence does PBMs have on access and the cost of medicines?

PBMs have a significant influence on the cost, supply, and access to medicines, and because formularies are set by PBMs, even medicines are listed as options in e-prescribing systems in electronic health records ( EHR). This tends to influence the behavior of doctors vis-à-vis the drugs they prescribe. PBMs do not actually deliver drugs, but they are essential to the flow of funds between drug manufacturers, pharmacies, health plans, drug wholesalers, hospitals, and physicians. PBMs negotiate PBM-negotiated rebates and rebates, as well as placements on the formulary. For more information on fund flow and drug flow.

Health plans often outsource formulary management to Pharmacy Benefit Managers (PBMs)

Due to the complexity and number of drugs, new FDA approvals, and ongoing industry research, formulary management and coverage determinations may be outsourced to health plans and management companies. pharmaceutical benefits (PBM) as a third party, or may own or acquire a PBM. to perform formulary management functions for the plan.

Because formularies are dynamic, patients may experience changes in access to PBM-administered medications and their formularies.

Insured patients may have limited or restricted access to certain drugs based on various methods used by PBMs and Formulary Policy Committees. These include:

formulary levels (some Formularies may have three levels, four levels, five levels, or six levels)
step therapy
Open vs. closed formularies
Pharmacy and Therapeutics (P&T) Committee Review Policy Updates
generic substitution
Therapeutic alternatives
Therapeutic exchange
Therapeutic substitution
Drug Utilization Review (Drug Utilization Review, DUR and Drug Utilization Evaluation)
formulary exclusions

There is an appeal process, discussed in a separate article, that provides insured patients with a method to appeal a decision not to cover a drug that is not on a formulary.

PBM policy may vary regarding access to off-formulary medicines

Health insurance plans can provide physicians and their patients with access to off-formulary medications when medically necessary.

Ethical standards for patients/healthcare consumers regarding PBMs and Formularies

In particular, the Principles of a Strong Medicine Formulary System state that PBMs and the formularies they manage should:

“Provide a rationale for specific form decisions upon request. The formulary system should include a well-defined process for allowing a physician or other prescriber to use an off-formulary drug when medically indicated.
“Allow individual patients to be satisfied with off-formulary medicines when the physician or other prescriber demonstrates that they are clinically justified.
"Institute an efficient process for the timely supply of off-formulary pharmaceuticals and impose minimal administrative burdens."
"Provide access to a formal appeal process if an off-formulary drug request is denied." (See formulary Exceptions)
“Include policies that physicians should not be penalized for prescribing off-formula medications that are medically necessary.

One of the challenges of ethical guidelines is that, in our view, they involve a thoughtful and sometimes lengthy appeals process. If emergency medication is needed and not covered by insurance, or prior authorization is required, a physician may be required to waive prior authorization and elect to treat (or be required to treat) a patient to stabilize the patient on EMTALA.