Formulary management is a highly effective strategy that pharmacy plan sponsors can implement to maintain a safe, affordable and meaningful benefit for patients. As seen in recent years, formularies are changing the dynamics of drug competition, which is great news for patients and payers. As we announced in July 2015, the Express Scripts' National Preferred Formulary (NPF) saves our plan sponsors approximately $1.3 billion throughout 2016, creating more than $3 billion of total savings for those plans since 2014. We will share our 2017 National Preferred Formulary in the coming weeks.
An effective formulary opens access to all clinically superior medications, while eliminating “me-too” options that have no added clinical benefit but have higher costs. And as a result, drug makers are compelled to charge fair prices for the medication they manufacture. Without a well-managed formulary, plan sponsors would pay significantly more for medications, which would result in higher cost-sharing and a reduced benefit for patients.
Building a formulary is a complex process. Express Scripts’ careful approach to formulary development is based on the following principles:
- 1. Clinical appropriateness of the drug – not cost – is our foremost consideration.
- 2. The prescribing physician always makes the final decision regarding an individual patient’s drug therapy.
- 3. Express Scripts develops clinically sound formularies based on objective evaluations from independent physicians.
Express Scripts has decades of clinical and formulary development expertise. Our formularies are created with guidance from three distinct committees:
National Pharmacy & Therapeutics Committee (P&T Committee): A group of 15 independent physicians and one pharmacist from active community and academic practices representing a broad range of medical specialties. These members, who are not employed by Express Scripts, are selected by the Committee based on their contributions to medical and pharmacy literature, national recognition in their specialty, involvement in clinical practice, and previous experience with P&T Committees. Prior to each meeting, a subcommittee of the P&T evaluates all members for any potential conflicts of interest with the medications on the docket for review.
Therapeutic Assessment Committee (TAC): Express Scripts’ internal clinical review body consisting of clinical pharmacists and physicians, who review specific medications following FDA approval using medical literature and published clinical trial data.
Value Assessment Committee (VAC): This committee considers the value of drugs by evaluating the net cost, market share, and drug utilization trends of clinically similar medications. VAC consists of Express Scripts' employees from formulary management, product management, finance and clinical account management. No member of VAC can serve in any capacity on TAC (and vice-versa).
P&T Committee Recommendations
The P&T Committee reviews medications from a purely clinical perspective – it does not consider the price of a therapy in its decisions. The P&T Committee analyzes a broad range of topics, including: new drug evaluations, new FDA-approved indications for existing drugs, new clinical line extensions, and new published or clinical practice trends that may impact previous formulary placement decisions. It also considers recommendations from the TAC.
Upon review of published research and clinical information, the P&T Committee will make one of the following recommendations for each medication:
- Include: The medication is safe and effective for its indicated use, and offers a clinical benefit not available by any other medication on the market. Express Scripts is required to include on the formulary any medication with this designation from the P&T Committee. Currently, approximately 15% of products are considered “Clinical Includes.”
- Exclude: The clinical benefits of the medication do not outweigh the cited safety risks. Therefore, Express Scripts must not include the medication on the formulary. Fewer than 1% of products on the market are considered “Clinical Excludes.”
- Optional: The medication is safe and effective for its indicated use and may be placed on the formulary. Medications considered optional by the P&T Committee have other clinically-equivalent alternatives available. Express Scripts’ VAC will then consider other factors, including cost, in making the formulary decision. All VAC recommendations are sent back to the P&T Committee for final approval. Approximately 85% of products are determined by our P&T Committee to be “Clinically Optional.”
Express Scripts’ clients often adopt Express Scripts-developed formularies or use them as the foundation for their own custom formularies, which are governed by their own P&T Committee. This allows plan sponsors to build a formulary that best meets the needs of their patient community within their healthcare budget.
Formulary controls also vary by benefit design. There are many types of formularies on the market, but they usually fall into three basic types:
- Open formulary: The plan sponsor pays a portion of the cost for all drugs, regardless of formulary status, although a plan sponsor may choose to exclude certain products, such as ‘lifestyle’ drugs, from coverage.
- Closed formulary: The plan sponsor will only cover drugs listed on the formulary. Non-formulary drugs are not covered unless approved through a formulary override process.
- Tiered formulary: Plan sponsors offer different copays or other financial incentives to encourage participants to use preferred formulary drugs, but will still pay a portion of the cost of the non-preferred drug. For example, when a plan sponsor offers a three-tier benefit design, it may cover non-preferred, non-formulary products on its third tier with a higher copay.
Express Scripts recognizes there are rare occasions when a patient is not able to use a formulary or “preferred” option, and we recommend that our clients offer an efficient review process to assist those patients in obtaining a non-formulary medication in these instances of medical necessity.
Why We Need Formularies
Prescription drug costs represent more than 10% of the overall healthcare dollar. Spending on medications increased 5.2% in 2015 due to rising drug price inflation and premium-priced therapies for large patient populations.
An effective formulary strategy, used in concert with other cost mitigation programs, can yield significant savings for plan sponsors and patients, while still preserving access to medication.
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