The formulary decides what the plan pays long before a member reaches the pharmacy.
Which drugs are covered, on which tier and under what conditions is where most pharmacy cost is set. We help you decide when a narrower formulary or a separate pharmacy arrangement actually saves money, and what it will ask of your employees if it does. Formulary changes are measured in the quarterly review of our health and cost strategy.
Lowest list price, largest rebate and lowest net cost are three different drugs.
A formulary built around rebates can prefer the product that pays the pharmacy manager the most rather than the one that costs the plan the least.
Tiers
Tier placement sets the member’s share and steers which drug gets used. We check whether the preferred products are preferred for your net cost or for their rebate. Tier placement is where formulary strategy most directly shapes both plan cost and employee cost.
Exclusions
National exclusion lists remove drugs where a clinically equivalent alternative exists. They save money, and they generate member calls; the list should be read before it is adopted, not after. Review the exclusion list against your own members’ prescriptions before adopting it.
Utilization Management
Prior authorization, step therapy and quantity limits apply clinical rules to high-cost drugs. Done well they cut waste; done loosely they become paperwork that saves nothing. Utilization management should be measured by what it saves after appeals and exceptions, not by how many requests it generates.
How rebates are defined and tested →
Managing GLP-1 prescription costs without dropping coverage →
Every formulary saving has a list of employees attached to it.
We run the member impact before the savings estimate is accepted, so nobody learns about a change at the pharmacy counter.
Disruption Analysis
How many members take a drug that moves tiers or leaves the list, and what the alternative costs them. The savings figure means little without this number beside it. A disruption analysis is the step that turns a formulary change from a guess into a decision.
Transition and Exceptions
Transition fills for current users and a working exceptions process for clinical need. Both belong in the contract, not in a promise from the account team. Written transition and exception terms protect members who are already stable on a drug when a formulary changes.
Communication
Affected members hear what is changing, why, and what to ask their doctor, before the effective date. That single letter decides whether a change is remembered as a saving or as a grievance. Clear member communication is part of any formulary change.
Bundled is simpler. Whether it is cheaper is a separate question.
Keeping pharmacy with the medical carrier and moving it to a separate pharmacy manager each have a real case. We model both on your claims rather than assume either.
Bundled with Medical
One carrier, one ID card, and medical and pharmacy data in the same place for care management. The pharmacy terms are the carrier’s, and in a fully insured plan they are not yours to negotiate. Bundled pharmacy is common in fully insured plans.
Carved Out
Your own pharmacy contract, with pricing, rebate and audit terms you can negotiate and test. It adds a vendor, a data feed to coordinate, and usually requires the plan to be self funded or level funded. A pharmacy carve-out suits employers ready to manage it.
What employers ask about formularies.
Can a small fully insured group change its formulary?
Usually only by choosing among the carrier’s plan options, some of which use a narrower drug list at a lower premium. We price those options at renewal. Formulary choice is one of the few pharmacy levers a small fully insured group has, so it is worth pricing each year.
Is a narrower formulary worse coverage?
Not necessarily. A well-built one covers a clinically equivalent drug for nearly every excluded one. The test is the disruption list and the exceptions process, not the length of the formulary. A narrower formulary with good exceptions can cost less without costing members access.
How often should the formulary be reviewed?
At every renewal, and whenever a major drug loses patent protection or a new high-cost class arrives. Formularies change every year whether or not you are watching. A formulary review at each renewal keeps plan design aligned with the drugs your members actually take.
Related guides.
Transition of Care When Changing Carriers
Keeping employees in treatment from being disrupted by a network or formulary change.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
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