A PBM’s formulary holds the “keys to the kingdom” when it comes to reducing prescription drug costs for a plan sponsor. A formulary is a list of drugs that is developed and maintained by a PBM for use by their clients. It determine what drugs are considered preferred (thus requiring a lower member co-payment) and which drugs may not be covered at all. 
Each drug that makes it to the formulary is placed in the appropriate tier. A plan sponsor’s drug mix (which is a major contributing factor in determining a plan’s drug costs) and the members out-of-pocket expense is driven by the makeup of the formulary. Typically, all changes to the formulary are reserved by the PBM. Contrary to the standard explanation by PBMs of how formularies are developed by their independent P& T committees, brand name drugs and rebates that are derived are often times an overriding influence on how the formulary is ultimately balanced.
With the continuing growth in specialty drugs, a formulary control measure has never been more important. We’ve seen it unfold over the last 6 months in the area of Hepatitis C drug therapy cost-containment initiatives. It started with Express Scripts (“ESI”) announcement that they would enter into an exclusive drug arrangement with AbbVie, the manufacturer of Viekira Pak, and not cover Gilead’s alternative Hep C treatment of Sovaldi and Harvoni. ESI has said that their decision was one of providing a therapeutic treatment alternative that was clinically as good or better, than the treatments they were excluding. And, oh by the way, ESI was able to negotiate some potentially significant cost controls and enhanced rebates as a result.
Not to be left at the starting gate, CVS Caremark, Envision, Optum and Catamaran have all announced their own exclusive Hep C programs, with one or the other manufacturer. This trend will continue as more PBMs will see the need and opportunity to develop beneficial arrangements for themselves and their clients. It will also continue in multiple therapeutic classes, particularly as the specialty pipeline continues to bring new and wonderfully effective drug regimens to market. Unfortunately, they will also be not-so-wonderfully expensive!
We’re expecting the next wave to occur this summer with the introduction of PD-1 inhibitor drugs for cancer and PCSK9 cholesterol-lowering medications. Stay tuned! The formulary exclusion wars are just heating up!
