Diagnosis:
Your detailed drug isn't on a plan's formulary. So now what?
Prescription:
Understanding reimbursement is the first step toward opening the door.
Formularies are often described using terms such as "open," meaning all products are available, and "closed," meaning that
only certain products are available. However, given the complex nature of pharmacy-benefit design, these terms are inadequate
as labels to describe formularies.
Managed care plans see formularies as a way to optimize the safety and cost-effectiveness of pharmaceutical treatments. Critics
argue that a formulary is a veiled means to cut costs by driving the use of less-expensive products. Regardless, formularies
are the hub of pharmacy-management efforts. It is critical that pharmaceutical sales representatives understand how formularies
are developed and the larger role they play in guiding a plan's pharmacy-management efforts. This article uses the following definition to guide the discussion on formularies:
A formulary is a list of drugs that a PBM or a health plan encourages doctors to prescribe.
For you, as a sales representative, the importance of the first component of the definition ("a formulary is a list of drugs")
is obvious – it is imperative that you know whether or not your detailed product is listed on a plan's formulary. However,
it is equally important for you to understand the degree to which a plan encourages physicians to prescribe on-formulary products versus off-formulary products. A formulary becomes meaningful to you only if
some level of "encouragement" enforces the list.
With that said, let's further review the concept of formulary by breaking up the definition into two parts. A formulary is:
1) a list of drugs; 2) that a health plan or PBM encourages doctors to prescribe.
Definition component 1: A formulary is a list of drugs ...
Figure 1: GoodCare formulary diabetes drugs
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In Figure 1 we see a sample diagram from the formulary book of the hypothetical GoodCare HMO. A formulary is an actual list
of products typically sorted by therapeutic class – like the diabetes drugs shown. Each therapeutic class contains names of
the products on formulary as well as any restrictions associated with the products. Formularies also frequently contain some
educational information about the class and its products.
While the FDA evaluates all new drugs for safety and effectiveness, it does not determine whether or not one drug is better
than another. Among other decisions, the managed care formulary decision-making process attempts to determine whether or not
one product in a class is better (or more cost-effective) than others.
Figure 2: Factors used by a P&T committee to guide formulary decisions
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The decision to include products on the formulary is typically made by a group of individuals called the pharmacy and therapeutics
(P&T) committee. The individuals sitting on this committee typically represent many facets of the medical community, including
primary care physicians and specialists, as well as nurses, pharmacists and other healthcare professionals. P&T committees
not only evaluate pharmaceutical products for potential formulary inclusion, but they also develop guidelines and other policies
to assure appropriate use of pharmaceuticals. Many plans delegate formulary decisions and the P&T responsibility to a PBM,
where its own committee makes formulary decisions for the plan. Factors such as those in Figure 2 are used to make formulary
decisions.
