Types of Formularies

The formulary system was initially developed in 1950 with the Joint Commission on Accreditation of Hospitals' encouragement as a means to ensure quality medical care while also controlling costs. No matter the type of formulary, each one should list the products that are approved, prescribing policies and usage of specific medications. It also should have an outline of the procedure for nonformulary medication usage. There are several types of formularies, four of which are used predominately (open, closed, partially closed and incentivized).

• Prescription Drug Coverage

Open

• Open formularies include few restrictions and provide coverage for all drugs. There is, however, a list of preferred medications which are generally less expensive for the patient. According to the California Association of Health Plans, doctors are encouraged to prescribe from the preferred list of drugs, and if patients receive medications that are not on this list, they likely will have to pay additional out-of-pocket expenses.

Closed

• Closed formularies include a specific list of covered medications that are reimbursed by the patient's prescription drug benefits. Any medications that are not on the list will not be reimbursed by the insurance plan. The medications usually include brand name and generic medications, with several choices available in each category. There should be a process in place that outlines the protocol for your doctor to receive authorization to prescribe a medication outside of the formulary (such as a letter outlining medical necessity).

Partially Closed

• Partially closed formularies are basically the same as an open formulary, but with a list of specific drugs or classes of medications (like weight-loss or cosmetic medications) that are not covered. Clinical necessity and cost of the medication are important factors in whether or not the medication will be covered. There also may be restrictions on the amount of the medication which will be covered (for instance, a single course of treatment of nicotine patches).

Incentivized

• Incentivized formularies promote using the preferred medications by offering an economic reward of sorts. This may benefit the patient, the doctor or the pharmacist. Patients may benefit from fewer out-of-pocket expenses, while doctors receive higher reimbursement amounts. Pharmacists may receive an increased dispensing fee.

Additional Types

• Additional formulary types include managed and positive and negative formularies. Managed formularies are characterized by increased insurance company control over the utilization of specific medications. These plans may require preauthorization prior to prescription. Positive and negative formularies refer mainly to the way that the formulary is presented to doctors and pharmacists. Positive formularies are basically closed formularies with a list of covered medications. Negative formularies are usually partially closed formularies that list only the medications that are not covered.