Tuesday, October 25, 2011

More Formulary Exclusions for Many Drug Therapies

The Pharmacy Benefit Management Institute (PBMI) just released its 2011-12 Prescription Drug Benefit Cost and Plan Design Survey, a detailed and highly informative report on employer-sponsored pharmacy benefits that you can download for free. A hearty Drug Channels “Thank You” to Takeda Pharmaceuticals North America for again sponsoring the research.

Today I am going to look at trends in formularies and utilization management. Key highlights (discussed in detail below):
  • Four-tier plans keep growing.
  • More employers are excluding entire therapy classes from the formulary. (Manufacturers, take note!)
  • Utilization management tools are being applied in many therapy categories.
I’ll examine the pharmacy reimbursement data later this week.


The PBMI survey data are collected from employers (not PBMs). The 2011-12 edition includes responses from 274 employers representing 5.2 million beneficiaries—a decline from the 372 employers in last year’s report. Most of the decline came from smaller employers. Thirty-three percent of the respondents in the 2011-12 survey were from employers with 10,000 or more beneficiaries vs. 26% in the 2010-11 survey. Survey methodology wonks can see the Profile of Respondents for more details.

The sample population of the PBMI survey is similar to the Kaiser/HRET survey that I discuss in A Look at Drug Benefit Tiers in 2011, although the PBMI provides much more detail on pharmacy benefit design decisions..

This year’s survey was analyzed by Brenda Motheral, Ph.D., the new Executive Director of PBMI. I respect Dr. Motheral’s work and appreciate the care that she took in presenting the data. She dropped certain questions, scaled back the historical trend information given the changing sample base, and even threw in some statistical tests. (Oh, how I do enjoy a good p-value!) Dr. Motheral will put her own stamp on next year’s survey, so I have high expectations for the 2012-13 edition.

Consistent with previous PBMI surveys, the employer—the PBM’s client—makes the ultimate decision about the prescription drug benefit offered to employees. In this year’s survey, employers report that the responsibility for pharmacy benefit design fell to the in-house human resources staff, the insurance carrier, or an outside consultant at three out of four companies. PBMs were responsible for benefit design at only 14 (5%) of the 274 companies surveyed. See Figure 8.

As always, I encourage you to read the full report for yourself rather than just relying on my interpretation.


The three-tier formulary—generic drugs, preferred brand-name drugs, and non-preferred brand-name drugs—remains the most common (59% of plans). A four-tier formulary was popular enough to be used by 25% of employers, an even greater share than the Kaiser/HRET data. Here are the data:

Large employers are more likely to have a formulary. One hundred percent of employers with more than 20,000 lives had a preferred drug list, compared to 90% of smaller employers (p<.05).


Cost management and cost-shifting to employees are a key theme in the PBMI report. Pharmaceutical manufacturers should note the growing exclusions for certain therapeutic categories from formularies. The chart below highlights the fact that a majority of employers are excluding coverage in many categories. (See Table 28 for the trend data.) If you notice my profile picture, you'll understand why the first treatment exclusion saddens me.

The report highlights some interesting differences in cost-management among employers.
  • Thirty percent of self-insured employers excluded Proton Pump Inhibitors (PPIs), compared to 52% of fully insured.
  • Carve-in employers were more likely to exclude PPIs, as were small employers (p<.05).
  • Fully insured, carve-in and smaller employers were more likely to exclude nonsedating antihistamines (p<.05) and most other drug classes.
The utilization of utilization management tools is also growing. The most popular tools across all therapy classes are:
  • Prior authorization
  • Quantity limits
  • Refill-too-soon limits
Pages 34 to 38 of the report look at differences between therapy classes/drugs. Prior authorization is used most frequently to manage growth hormones, experimental and investigational drugs, injectables, and Retin A.

Stay tuned for a look at the always-controversial drug reimbursement data!


  1. Adam,
    Another great summary.  The PBMI website must be locked up as I am unable to douwnload the Takeda Benefit Rpt.  I have tried several times and no luck.  Any thoughts?

  2. Thanks, Bruce. Links are working for me, but I'll pass your message to PBMI.

  3. Tom Connelly, RPhOctober 26, 2011

    A common misconception among our patients is that non-coverage by the plan means the patient cannot have the prescription dispensed.  Not true!  Non-coverage just means the PLAN won't pay for the prescription;  the PATIENT is perfectly welcome to pay cash out-of-pocket for the prescription.  
    So don't let that first exclusion deter you from seeking relief for your alopecia.  (Although, if you have BPH your urologist would be perfectly justified in prescribing finasteride which just happens to have the side effect of hair growth...)

    Tom Connelly, RPh
    Owner, Sun Pharmacy
    Rising Sun, MD