What is a non-formulary drug?
A non-formulary drug is a medication that is not included on a health plan’s approved drug list (formulary). This typically means the plan does not cover it or requires special approval before coverage is considered.
Why are some drugs listed as non-formulary?
- Lower-cost or clinically equivalent alternatives exist
- The plan’s P&T committee has concerns about value or evidence
- The product is newly launched and still under review
- The drug is high cost and subject to spending controls
- It is not commonly prescribed or has limited clinical data
What is the sweet spot for non-formulary drugs?
Although the formulary exception is technically a one-off, if a patient needs a refill of the drug within 120 days, that refill—along with all subsequent refills—is also likely to be covered. Once the exception is processed and the prescription is in the patient’s claims history, most claims processing hubs will bypass the exclusion edit. The patient will be able to access the drug indefinitely.
This access trick poses a conundrum for manufacturers. If your non-formulary drug is in the sweet spot—meaning that it’s an inexpensive drug, dispensed from retail pharmacies rather than specialty pharmacies—it may be preferable to stay where you are rather than attempting to get on a plan’s formulary.
While this seems counterintuitive, negotiating with payers to gain formulary placement opens up the possibility that a payer might impose utilization management restrictions on your drug. Physicians might need to submit a prior authorization, subject to review by the plan’s medical director, before the prescription is allowed. Worse yet, the drug might be saddled with step therapy restrictions, which specify that patients must first step through a competitor’s drug before beginning treatment.
Both scenarios are typically much worse for your bottom line than the drug remaining unlisted or on an exclusion list. Essentially, if your drug has the potential to be in the sweet spot, your company will likely fare better by sending sales reps out to educate physicians about your drug’s benefits and general availability, regardless of its lack of formulary placement.
