Managed Drug Formulary (Benefit Tips ® - © 2002)

Many employers get frustrated with the consistent cost increases of their drug plans. This Benefit-Tip takes a look at one way to curb the rising costs by isolating and managing a primary cost driver.

The inflation rates of drug benefits have been twice as high as the CPI for over two decades. One reason is that most plans automatically cover new and expensive drugs without any cost-benefit review. Only 6% of benefit plans use a managed drug formulary to specifically list drugs that are covered.

A managed drug formulary covers around two-thirds of the 10,000 drugs that are available through an unmanaged plan. A panel of health care professionals reviews the formulary quarterly to make sure that it continues to include the most cost-effective drug treatments.

Some employers balance cost control with freedom of choice by using a two-tiered plan design that pays 100% of the cost of drugs on the managed formulary and a lesser amount (50-80%) for drugs not on the formulary.

The electronic adjudication of drug benefits encourages dialog between the pharmacist and patient because the pharmacist knows which drugs are covered at which reimbursement level and can work with the patient and physician to facilitate decision-making.

Formulary management is one way to control future cost without negatively impacting the current coverage for your staff.