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Rethinking Formularies

The majority of Medicare Advantage Part D (MAPD) health plans utilize a “template formulary” configured by their PBM (Pharmacy Benefit Manager). Why? Because it is usually developed and maintained by the Pharmacy & Therapeutics Committee affiliated with their PBM and it is less expensive (custom formularies can cost an additional $100,000 annually) and subject to fewer publication and maintenance errors than a custom formulary--one that is developed by the health plan. Health plans also receive significant rebate dollars from the manufacturer payments for drug placements on PBM formularies. There are several reasons why this thinking should be re-evaluated:

  • Members with chronic diseases need to be able to access the medications usually prescribed for their condition at a low cost-share or even $0 cost share. The shared savings program for insulin developed through the CMS Innovation Center is a good example of trends to ensure diabetic members have access to more affordable medication coverage. “Enhanced drug plans cover insulin products at a monthly copayment of $35 in the deductible, initial coverage, and coverage gap phases of the Part D benefit. Participating plans do not have to cover all insulin products at the $35 monthly copayment amount, just one of each dosage form (vial, pen) and insulin type (rapid-acting, short-acting, intermediate-acting, and long-acting). In 2022, a total of 2,159 Part D plans will participate in this model, a 32% increase in participating plans since 2021. This total includes 33% of all PDPs (258 plans) and 38% of MA-PDs (1,901 plans, including segmented plans) available in 2022, including plans in the territories. Between 7 and 10 PDPs in each region are participating in the model, in addition to multiple MA-PDs.”1

In addition, adherence to diabetic medications, statins for cholesterol, statin use in persons with diabetes, and hypertension medications increases plan Star ratings. Adherence improves when medications are low or no cost. The weight of these Star measures for the health plan is significant at “3”, the highest weight. Other measures such as “getting needed prescription drugs” and “complaints about the plan” can be traced to difficulty obtaining medications due to cost, both weighted at “2”. The Medicare Plan Finder (MPF) Price Accuracy measure is a 2022 Star measure with a weight of “1”.

Health plans have accurate and timely data about the most common chronic conditions in their member populations and a member-friendly formulary that includes the medications most commonly prescribed to treat those conditions at an attractive price or at no cost will ensure medication adherence and member retention and loyalty.

  • Many MAPD plans are affiliated with one or two large acute care systems with a uniform formulary which does not match the health plan formulary, making transitions of care into and out of the acute care setting potentially problematic for members. Formularies that are similar or almost identical would enhance seamless care.

  • Because of the increased utilization of specialty drugs (about 37% annual Part D spending increase) and the percentage cost share (up to 33% on the top specialty tier) instead of a fixed cost share, the out-of-pocket costs members pay for Part D drugs is increasing every year. Proposals for drug policy changes include allowing Medicare to negotiate the price of drugs, restructuring the Part D benefit to add a hard cap on out-of-pocket drug spending, requiring manufacturers to pay a rebate to the federal government if their drug prices increase faster than inflation, and shifting more of the responsibility for catastrophic coverage costs to Part D plans and drug manufacturers.2 One or more of these proposals could become regulation and/or law in the next few years necessitating different and innovative formulary strategies.



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