Formulary exclusion—the ultimate revenge?

Pharmaceutical CommercePharmaceutical Commerce - January/February 2014

Last January, when pharmacy benefits manager Express Scripts (St. Louis) announced that it would exclude 48 medications from its 2014 national preferred formulary (which maintains a three-tier benefit strategy, to segregate generics, preferred branded drugs and non-preferred branded drugs), the PBM did not hide its antipathy toward copay-offset programs. According to the company, a range of factors (including clinical information, cost and market share movement) was considered in the decisionmaking, but not coincidentally, 93% of these recently de-listed therapies have a discount coupon or copay-offset card associated with them.

“By excluding these products [from our national formulary], this strategy renders those cards useless,” said Steven Miller, CMO for Express Scripts, in an October 2013 interview at

Express Scripts serves 100 million people, of whom 30 million have their benefit on the national preferred formulary. “We put the pharma industry on notice that we would be more aggressive this year. Our preference would be to not exclude everyone and get everyone down to lowest possible cost and preserve largest choice. But it’s clear if you’re willing to lower pharmacy choices, you can drive greater economics and still preserve health,” said Miller.

When CVS Caremark made a similar move in revising its 2012 formulary to exclude 34 drugs, the company wrote that its intention was “to help plans achieve lower total costs…” and “to counter aggressive direct-to-consumer advertising and increased marketing efforts by big pharmaceutical companies that promote the use of higher cost brand drugs.”

The impact of such decisions is that “patients will now be required to either change therapy or pay 100% OOP, and they are the victims of the PBM battle for brand control,” says Rick Randall, chief innovation officer of Triplefin. “The physicians and patients are stuck in the middle trying to manage their disease in a consistent manner while the PBMs focus is on increased rebates.” Moreover, he says, formulary decisions vary by payer, PBM and other factors; in that environment, how does a patient maintain therapy for a given drug?

PBMs tend to speak more loudly about conserving the payer dollars of the benefit programs they run, but not quite so loud about the rebates that they negotiate with manufacturers. As sources interviewed for this article note, changes in negotiating power when manufacturers sit down with the PBM representatives are going to be a factor in how the discussions conclude.

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