Buzzword: Formulary
What does it mean? A formulary is a list of approved or preferred prescription drugs compiled by insurance plans that–in theory, at least–are supposed to drive down overall costs for the insurer while still providing adequate treatment for patients. "Closed" formularies generally cover only drugs approved by that particular insurer. "Open" formularies generally provide coverage for both listed and unlisted drugs, although medical providers are usually encouraged to prescribe drugs on the formulary. Many formularies fall somewhere between "open" and "closed," with substantially higher co-payments used to steer patients toward listed drugs and away from non-listed ones.
Why the buzz? Formularies are constantly changing, with drugs being added, dropped, upgraded or downgraded (in pricing) periodically. Specific medications a patient may have used for years may suddenly be dropped from a formulary or cost substantially more than before. For example, Cathleen Otto of Spring, Texas, recently found out just how much a formulary change can cost. In January she saw her out-of-pocket costs for the rheumatoid arthritis medication she has been using for years jump from about $6.25 per injection to $72 after her insurer changed its formulary. She says she has tried just about everything and nothing else relieves her symptoms adequately. On top of that, her health-care insurance premiums jumped almost $200 a month at the same time.
"I have decided–without my doctor's permission–to reduce the frequency of my shots to every other week," says Otto, who is a retired school teacher. "I am sorer and more tired, but I cannot afford this increase."
So who picks the drugs that are part of a formulary? Committees comprised largely of doctors, pharmacists, and other health-care providers not affiliated directly with the insurer determine which drugs will be included on a formulary. These committees select drugs and other products, keeping in mind factors like safety, efficacy, and quality, along with the cost to the insurance company. Many formularies are reviewed and revised on a quarterly basis. The whole process is aimed at providing coverage for a wide variety of medications while, at the same time, pushing physicians and patients toward less- expensive alternatives. The extent to which formularies make decisions based on unbiased clinical evidence varies.
Although there are exceptions, most formularies tend to favor cheaper generics over generally more expensive brand-name drugs. Substitution of generics for brands can save consumers hundreds of dollars a year in many cases, while providing the same health benefits. Some insurers will agree to cover drugs not on their formulary, but some will not. Sometimes a patient or physician has to provide proof to the insurer that a non-formulary drug works better in order to get prescription coverage for it.
Essential information:
Find out more about formularies at:
Avalere Health Report Report on Formularies;
U.S. Government FAQ on Medicare Formularies
U.S. Government Medicare Formulary Finder
—Bob Williams, strategic resource director, Consumers Union
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