Drug Formulary Explained

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            This article’s purpose is to define the term ‘Drug Formulary,’ discuss exactly who chooses the drugs on the formulary, what each tier means, as well as cover existing digital tools available to help patients determine which medications are covered by their health insurance plans. In addition to this article, more digital tools have been created to further explain the term ‘Drug Formulary’ and will be added to this website once available.

What is a drug formulary?

            A drug formulary is a list of prescription drugs, both generic and brand name, used by physicians and practitioners to identify drugs that offer the greatest overall value. Oftentimes healthcare plans may only pay for medications that are on this list, while some health plans will only pay for medications that have been approved for sale by the U.S. Food and Drug Administration. Overall, the purpose of a specific healthcare plan’s formulary is to steer patients toward the least expensive medications that are still effective in treating various health conditions. It is important to note that an individual will pay more if they and their doctor select a medication that is not covered on the patient’s health plan formulary.

Who chooses the drugs on the formulary?

            Common in most healthcare plans, a committee of physicians, pharmacists, and nurse practitioners develop and maintain the formulary. This committee of local experts evaluates new and existing medications and then selects the drugs to be included in a health plan’s formulary based on their safety and effectiveness. The committee then chooses the most cost-effective drugs in each therapeutic class. A therapeutic class is a way of organizing medications in categories based on what they treat or how they work in a certain way. For example, antibiotics are used for the treatment of infections. Typically the formulary is updated yearly; however it is subject to change as needed when new information on the effectiveness and safety of drugs become available.

What is a formulary tier?

            Medications listed on a formulary are usually grouped into tiers. The tier that your medication is listed under determines your co-payment or portion of the drug cost. A typical drug formulary includes three or four tiers.

  • Tier 1 includes generic medications and has the lowest co-payment.
  • Tier 2 includes preferred brand name medications and has a higher co-payment than tier 1.
  • Tier 3 includes non-preferred brand name medications and has the highest co-payment.
  • Tier 4 includes specialty medications; however this tier is often combined with Tier 3 medications in some healthcare plans.

            It is important to note that a medication may be placed in tier 3 or 4 if it is new and not yet proven to be safe or effective. A medication may also be placed in these tiers if there is a similar drug on a lower tier of the formulary that may provide an individual with the same benefits but at a lower cost. A health plan may also provide a list of medications that are not covered and for which a patient will need to pay the full retail price. This list may include drugs such as experimental medications and over the counter medications.

Do formularies have any restrictions?

            Many healthcare plan formularies have certain procedures to restrict certain medications. This is done so as to encourage a doctor to utilize specific medications appropriately, as well as to save money by preventing medication overuse. Some common restrictions also include:

  • Prior Authorization: As stated in a previous article, Prior Authorization is a process by which your doctor must obtain approval from the health plan for you to obtain coverage for a medication on the formulary. Oftentimes these are medications that may have a higher potential for inappropriate use, safety issues, or have lower-priced alternatives on the formulary.
  • Step Therapy: This is a process in which a health plan requires patients to first try a certain medication to treat their health condition before utilizing another medication for a specific condition. Usually the first medication is a less expensive alternative.

Are there any tools or applications available to help patients determine which medications are covered by their health insurance plans?

            Currently there are very little tools or programs available that allow patients the chance to check if their medication is covered by a specific plan, however the two most helpful tools are listed below along with a short description.

  • FingertipFormulary.com

            Fingertip Formulary is an easy to use tool that allows users to determine the formulary drug status for health plans in their areas. An individual is first guided to select a drug from an alphabetical list, and then chooses their state and their healthcare plan. This is separated into two categories, Medicare and Non-Medicare, to make it easier to find healthcare plans. Finally, the tool then displays the results and features the option to print the page, making it a valuable resource for patients who may want to print and take their results with them to the doctor’s office or pharmacy.

  • TRICARE Formulary Search Tool

            The TRICARE Formulary Search Tool is an online tool that allows users to input the name of their medication into a search bar. The site will then feature a pop-up stating the drug’s name, the strength of the medication, the form in which is comes in, as well as if the drug is branded, generic, or over the counter. While this tool does not check if a specific drug is covered by a certain healthcare plan, it does offer good information on the drug itself and is useful if patients want to look up what type of medication they have been prescribed.

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