The Truven Health Blog

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The Hidden Impact of Drug Formularies on Member Health

By Truven Staff
A recent from the National Business Coalition on Health described prescription drugs as the third largest healthcare expense in the United States. As plan sponsors continue to search for opportunities to manage rising prescription drug costs — including option-limiting strategies such as narrow pharmacy networks and formulary options — the larger Pharmacy Benefit Managers (PBMs) have implemented a closely related strategy: exclusion of products from their standard formularies.


 
The PBMs assert the exclusion of products from the formulary has had a positive impact for plan sponsors:

  • Increased rebate payments due to greater leverage with pharmaceutical manufacturers.
  • Exclusion of “me-too drugs” that are structurally very similar to existing drugs, but with a high price and little, if any, clinical benefit.
  • Control of products linked to manufacturer copay coupons that reduce member cost sharing but increase the plan’s cost.

However, plan sponsors must also consider the impact of excluding therapies on a member’s medication adherence and overall health outcomes. When a claim is rejected at the pharmacy because the drug is excluded from the formulary, the member must pay out-of-pocket or ask their physician to prescribe an alternate medication. The increased cost or additional effort can be a barrier for members and may cause them to abandon the prescription, which can compromise their health and lead to costly complications.

Member out-of-pocket costs are also negatively impacted when a PBM chooses to reduce therapy options to one brand product in a class. For 2015, the two largest PBMs have limited the formulary option for diabetic test strips to one brand product line. Although plan sponsors will see an increase in rebates, members enrolled in a Consumer Driven or High Deductible Health Plan will likely face higher out-of-pocket costs at the pharmacy to comply with the formulary.

The member may choose to go outside of the benefit to purchase lower-cost supplies; however, the costs won’t count toward meeting deductibles or out-of-pocket maximums. Further, utilization data for the claims will be lost because the claims will be rejected at the point of sale. Thus, any medication adherence or disease management program reporting you produce will be understated, making it seem like members are non-compliant when they are making choices based on paying a lower cost.

To ensure you fully understand the impact of any formulary changes made by your PBM, consider:

  • Conducting an independent review of your PBM’s formulary to evaluate whether the changes being made are clinically appropriate.
  • Gaining a thorough understanding of the cost impact of formulary changes to both you as the plan sponsor and to your members as consumers.
  • Asking what support is available to encourage impacted members to start on a new therapy and monitor that they continue to take them.
  • Providing members with resources (letters, articles, newsletters) to help them make informed decisions about medications.

Kristen Lybrook
Account Director


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