HMOs, PBMs raise formulary firewalls

April 1, 1999

Pharmaceutical Representative

Health maintenance organizations and pharmacy benefit managers are finding new ways to restrict formularies and contain pharmacy costs

If there's more than one way to skin a cat, then managed care plans have their razors ready.

According to a recent report from Newtown, PA-based Scott-Levin, health maintenance organizations and pharmacy benefit managers are finding new ways to restrict formularies and contain pharmacy costs - an action previously decried by consumers and legislators as anti-consumer.

Health maintenance organizations and pharmacy benefit management companies are using two new strategies to bring pharmaceutical costs under control: earmarking some products for "restricted use" or "prior authorization" formulary status, and implementing variable copayment programs.

As a result, Scott-Levin summarized, patients and physicians "can expect to see more barriers to prescriptions being filled as written."

Often, products are placed on restricted use or prior authorization formularies because they cost more or are late entrants to a therapeutic class. In order for a patient to fill a prescription for such a product, his or her physician must either document why the prescription should be filled despite being off formulary, or the patient must assume a greater portion of the cost for the drug.

The latter option, which is gaining popularity, is know as a variable copayment plan.

With variable copayments, patients are charged different amounts depending on which prescription medicine they take home from the pharmacy.

For example, if the medicine is a generic product that is on formulary, the patient might only pay a $5 copayment. If it is a brand-name product that is on formulary, however, the patient might be required to pay $10. And finally, if the medicine is brand name and off formulary, the patient might make a copayment of $25, $35 or more.

Such plans are distinguished as either two-tier variable copayment or three-tier variable copayment plans.

Managed care organizations invented such plans in an attempt to contain costs without alienating plan members who balked at restrictions in their health care options.

Target products

According to Scott-Levin, the 10 therapeutic classes that plans are restricting the most include: antifungals, migraine treatments, select pain medications, antidepressants, cholesterol reducers, alpha-blockers, antiulcers/ulcer combinations, calcium channel blockers, sympathomimetic antiasthmatics and macrolides.

Also, managed care plans participating in Scott-Levin's 1998 fall "Managed Care Formulary Drug Audit" reported the following average copays within a two-tier variable format: $11.56 for brand-name drugs and $5.30 for generic drugs.

Within a three-tier format, managed care plans reported average copays of $6.48 for generic drugs, $12.04 for branded formulary drugs and $24.45 for branded non-formulary drugs.

Fifty-four percent of U.S. managed care subscribers whose drug benefits are controlled by formularies responded to Scott-Levin's audit. PR

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