How are Drug Formularies Developed?

Now that we have covered the basics of a drug formulary, let’s dive a little deeper into some details. Have you ever experienced a situation where a new employee is begrudgingly forced to change one of their medications after switching over to your health plan? Or where a doctor that is covered within your network prescribed a medication and upon arriving at the pharmacy, it’s discovered that the medication isn’t going to be covered? Understanding how formularies are developed can help you to prevent these situations or provide solutions for your employees when they experience issues. There are numerous factors that go into the development of a health plan’s drug formulary, but ultimately the driving force behind every decision is the health and well-being of the member.

Who makes drug formularies?

Drug formularies are developed by a team of healthcare professionals who extensively research the effectiveness, safety, and cost of each medication within a class. The Pharmacy & Therapeutics committee (P&T) typically consists of physicians, pharmacists, and other health care professionals of varying specialties who are experts in their field. When a drug is approved for use by the FDA, it is evaluated for benefit by this team before it is added to the formulary. The team closely evaluates the clinical trials that led to the approval of the medication. They investigate how the drug treats a disease when compared to other similar medications and any side effects caused by the medication. As new data becomes available, they may revisit a medication and decide to remove it from the formulary if deemed unsafe.

Why aren’t all FDA approved medications on a drug formulary?

Ultimately, there are multiple factors that contribute to this. When a drug is developed that treats a disease with a new and unique mechanism, other drug companies often make copy-cat products that work the same way, and produce the same effects, but are different enough to be considered a new medication. These medications would be approved by the FDA as suitable alternatives to the initial drug, and could therefore be considered interchangeable. For example, there may be five different medications in the same class that treat a disease the same way. Instead of choosing to put all five medications on the formulary, the P&T committee may decide on the top two or three most effective and safe drugs to include. If all the drugs in a class are deemed safe and effective, the plan may choose to cover the most cost-effective options. Since multiple manufacturers are producing a similar drug, pricing often varies. Additionally, a medication may cost less due to rebate agreements between a drug manufacturer, the pharmacy benefit managers (PBM) and the insurance carrier.
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What happens when a branded drug goes generic?

When a generic equivalent of a branded medication becomes available, the P&T committee may consider removing the branded medication from the formulary or placing it on a more costly tier. This decision is often due to the cost saving potential of using the generic medication instead of the brand. A change in coverage like this only occurs when the generic medication is found to be equally safe and effective as the branded medication. This decision ultimately saves the plan and the member money. A plan’s drug formulary is the key to determining what your employees will pay for a medication at the pharmacy. Ultimately, the formulary serves to ensure that patients are treated in the safest and most effective way that is also cost-efficient. If an employee comes to you with concerns about their medication coverage, let them know that they can often work with their provider to find an alternative drug that is safe, effective, and covered. The formulary for a health plan should be accessible to all members, and the best way to prevent any confusion at the pharmacy is to bring have the formulary with you at the doctor’s appointment. Continue to follow our blogs as we continue to explore ways to address some of your employees most asked questions around their prescription drug benefits