What is a Formulary and how are they Developed?

What is a formulary?

A formulary is a list of generic and brand name drugs that are covered by a health plan. Pharmacy Benefit Dimensions (PBD) offers several formulary options for both our self-funded and Medicare Part D Prescription Drug Plan (PDP) Employer Group Waiver Plan (EGWP) clients.

What is a tier?

A formulary is divided into various categories, or tiers. Drugs are placed in tiers based on the drug type. Drug types include generic, preferred brand, non-preferred brand and specialty. At PBD, we offer a variety of formulary options based on a tiering structure including:

  • Self-Funded Clients
    The standard PBD formulary is structured in a 3-tier format. There are approximately 5,465 (71%) drugs placed within the first 2 tiers of the formulary, which contain the majority of generic and preferred brand medications. For those employers who choose a 3-tier drug benefit for their employees, most non-preferred drugs are accessible via the 3rd tier copayment.

    In addition to the standard 3-tier formulary, PBD also offers a 4-tier and 5-tier formulary. Similar to the 3-tier, the 4-tier and 5-tier contain the majority of generic and preferred brand name medications within the first 2 tiers. What makes the 4-tier and 5-tier formularies unique is the placement of specialty brand name drugs, which tend to be higher cost medications used to treat complex diseases.

  • Medicare Part D EGWP Clients
    Our standard EGWP base formulary is also structured in a 3-tier format. There are approximately 3,982 (79.1%) drugs placed within the first 2 tiers of the EGWP formulary. In addition to the standard 3-tier base formulary, PBD offers a 5-tier EGWP base formulary, which places drugs that cost over $670/month into the 5th tier.

How are PBD’s formularies developed?

Our formularies are developed by a Pharmacy and Therapeutics (P&T) Committee. The P&T Committee consists of 14 practicing physicians and 4 pharmacists. The identity of the committee members remains confidential to avoid undue pressure and lobbying from interested parties. Committee membership is reviewed annually.

What does the PT Committee do?

The P&T Committee meets on a quarterly basis to review new drugs that are available in addition to reviewing existing classes and categories on the formularies. Additions, deletions and modifications are based on sound clinical evidence to make quality care available while appropriately containing costs.

After discussing the clinical data correlating to each formulary update to be considered, a decision is made by vote of all members. Decisions are based on the following criteria:

  • Safety
  • Efficacy
  • Cost

These criteria are reviewed with comparison to other drugs in the same class. Recommendations made by a medical advisory group specializing in the drug class in question are also considered.

How does this benefit our clients?

Our clinical team utilizes a value-based approach when making formulary decisions which focuses on low-cost therapeutic alternatives such as generic medications, to help balance efficacy, safety and cost-effectiveness. This is in stark contrast to a revenue or rebate driven formulary that would aggressively market brand name medications to secure rebates.

While this may look attractive on paper, you have to be mindful that the net cost of your prescription drug plan can often be driven up because plan sponsors will be paying more for those expensive medications that receive rebates.

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