The committee first reviews the safety and effectiveness of the drugs and the therapeutic equivalency of the drugs in each class. After determining that certain drugs have identical active ingredients, strength and quality, the committee reviews the cost of these therapeutically equivalent drugs. Managed care organizations then negotiate with pharmaceutical companies to get favorable pricing for drugs included on the formulary. There are exception processes that allow a member or a physician to request that a non-formulary drug be covered. The appeals are evaluated by pharmacists and physicians to determine whether there are valid medical reasons for a non-formulary drug to be approved for coverage.
Formularies help to keep medical costs under control.
There are plan design options available that allow us to maximize cost containment while minimizing the impact on insureds. Plans without a formulary in place should review whether adding a formulary helps to achieve the benefit and financial goals for medical benefits. To make the implementation of a formulary successful, careful plan design and employee communication are critical. We can help evaluate all of the alternatives balancing employee satisfaction and plan costs. These regulations were to clarify when an employer's cafeteria plan may allow employees to change elections for coverage under accident, health, disability or group term life insurance.