The drug formulary is becoming a household word. And for good reason. The formulary is not a new concept, having been implemented in a private hospital in 1816.1 For many years thereafter, formularies were commonplace only in the hospital environment. Today the drug formulary system is evolving into an integral part of the managed care arena.
The formulation of Pharmacy and Therapeutics Committees to oversee formulary management occurred almost 120 years after the formulary concept began. In most managed care organizations (MCOs), drug formulary systems are developed through the Pharmacy and Therapeutics Committee. This committee is usually comprised of physicians and pharmacists on staff at the MCO, as well as practicing clinicians who care for the MCO subscribers. Some of these committees may also include quality improvement specialists, other health-care clinicians and patient advocates. The cornerstone to each drug product considered for formulary inclusion is practicing physician input offering their unique knowledge, skill and judgment regarding the merits of individual drug products.
The formulary is a continually revised compilation of pharmaceuticals that reflects the current clinical judgment of medical staff.2 The Academy of Managed Care Pharmacy and The American Society of Health System Pharmacists state that the purpose for ongoing management of the formulary system is to optimize patient care through rational selection and use of drugs and drug products within the healthcare setting. In other words, the goal of formulary management is superior therapeutics.
Drug formularies have been a part of managed care pharmacy benefits from the beginning. In the most basic form these formularies were lists which excluded, for example, injectable medications and over-the-counter medications. Benefit designs were largely "open", meaning that most oral medications used in the ambulatory setting were reimbursed whether or not the medication was listed on the formulary. In the "open" formulary setting, the medication list served as a suggestion and no penalty was placed on the patient or physician for medications prescribed or used which were not included. These open fomulary designs are becoming less common and are predicted to be used in less than 6.5% of HMO's in 1998.3 But at the same time, in 1998 many HMO's report a broadening of formularies and benefit designs to include coverage for categories like injectables and over-the-counter medications.
Restricted formularies, sometimes referred to as modified formularies, have become more commonplace in recent years, and so have variations of benefit designs used in conjunction with those formularies. A restricted formulary involves limiting drug classes to listing only generics or only one of each chemical structure medication within a drug class. These restricted lists may be coupled with a benefit design which places more of a financial burden on the patient when a brand name drug is chosen or a drug not included on the list is prescribed. Variable copayments, placing a higher burden of the cost towards the patient for brand medications and non-formulary medications, are often assigned as part of a benefit design with a restricted formulary
"Closed" benefit designs place all of the financial burden for the drug prescribed back on the patient if the drug is not listed on the formulary. Closed designs can vary significantly based on the number of drugs included on the formulary. A formulary listing over 1500 medications will have a significantly different impact on the HMO, prescribers or patients than a formulary listing 600 medications. Despite some controversy, the prevalence of closed formulary designs continues to grow and is expected to be found in over 39% of HMO's in 1998.3
Finally "selective/partially closed" formularies, coupled with innovative benefit designs, are receiving the most rapid growth in the managed care pharmacy industry today. These lists and designs are described by reimbursement limited to a formulary of drugs plus select non-formulary drugs once prior approval has been granted. This possibly more friendly approach will likely gain popularity due to managed care competition and the need to be more customer focused.
In summary, well constructed formulary systems developed through a close partnership between pharmacists and physicians, continue to play an integral role in the provision of cost effective pharmaceutical care. A wide variation exists among managed care organization's fomulary lists and the pharmacy benefit designs used in conjunction with those lists. Physician involvement in and support of the formulary lists, for which their managed care customers are requested to use, is paramount for the formulary to be an effective tool for assisting in maintaining or improving the quality of patient care.
REFERENCES
1. Pearce, MJ, A review of Limited Lists and Formularies PharmacoEconomics 1(3) 1992; 191-202.
2. Practice Standards of ASHP;ASHP Statement on the Formulary System
3. Novartis Pharmacy Benefit Report, Trends and Forecasts 1997
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