What’s the difference between formulary exceptions and exclusions?

Recent MMIT data reveals that approximately 75% of all formularies are still considered open. In theory, this means that any drug that is not listed on a payer or PBM’s formulary can still be prescribed—if, of course, providers are willing to take on the administrative burden of requesting an exception.

It’s important to remember that a payer’s formulary is essentially an advertisement of coverage. There are some drugs that a payer will cover, but which are not listed publicly on the formulary. For example, a payer may recognize that it needs to provide patients with access to an expensive gene therapy. If the payer advertises that fact by placing it on the formulary, patients in need of that therapy may switch plans to obtain coverage—and then the payer is obligated to pay for an expensive treatment for several new patients.

Most payers and PBMs also publish a formulary exclusion list, which specifies drugs that they will not cover. Changes and additions to these lists are common, and patients are often asked to switch medications midtreatment. However, even the existence of a drug on a formulary exclusion list does not mean that the payer/PBM will not cover it if the treatment is judged medically necessary.

For drugs on the pharmacy benefit, formulary exceptions are usually driven at the point of sale by the pharmacist. If a drug is explicitly excluded from the formulary, the pharmacist will be alerted during claims processing that the drug is not covered. If the drug isn’t listed on the formulary but isn’t explicitly excluded, it may simply be processed at the point of sale without error. In this case, there is usually a tier placement default for non-formulary drugs, generally at the highest patient co-pay tier.

When are the pharmacists likely to request an exception?

If the pharmacy claims system rejects the claim, the pharmacist can choose to make a call to the processing hub that manages claims assistance to request a one-time exception. These exceptions are typically granted. Each hub will likely have a variety of thresholds that trigger a review, such as a cost threshold or multiple-prescriptions threshold. The exception request may then be routed to the on-staff medical director for review and approval or denial.

Pharmacists are incentivized to request exceptions in many ways, most notably regarding their inventory. For example, if a pharmacist is handed a prescription for a non-formulary drug and has that drug in stock, they are more likely to go to the trouble of requesting an exception, as they want to sell their inventory. But if the pharmacist has a generic or reference drug available instead, they are more likely to call the doctor to request a different prescription.

Patient preference can also be a motivating factor. If a patient explicitly asks the pharmacist to call and get an exception, the pharmacist is likely to do so; of course, most patients aren’t aware that they have this option. Often, the pharmacist will hand the prescription back to the patient and tell them to call or visit their doctor again for an alternative prescription.

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