Tiered formularies

Automatic stop orders Controlled-substances considerations Formulary status or tier of medication >... 

Differential/tiered co-payments Member s prescription co-payments are higher for non-formulary products... 

In general, MCOs with formulary programs use a variety of methods to enforce formulary adherence. These methods vary in their restrictions, and typically include financial incentives for both prescribers and patients. Table 43.1 lists and defines typical restriction methods, such as prior authorization and treatment limitations. Table 43.2 lists commonly used enforcement strategies and financial incentives, including switch programs, differenti-ated/tiered co-payments, and education programs. 

While the US doesn t believe in the government negotiating prices with the pharmaceutical industry, the rise of formularies by Medicaid and by private insurers has played a similar role in cost contaimnent and has dramatically transformed the potential returns on research investment. The principle of tiered formularies is theoretically simple - insurers cover the cost of basic dmgs for an indication and the consumer then makes choices about how much additional value they want, and accepts the additional costs. Most formularies have three tiers, possibly four as shown in Table 11. Managed care formularies vary considerably in the co-payments expected for each tier, and the tiers assigned to a given dmg. 

Table II. Typical Tiered Formulary for Managed Care Providers...

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