Formularies can be open formularies or closed formularies with variations in between the two extremes. Open formularies are lists of drugs a managed care organization recommends for the physician's consideration. There is no requirement that the physician prescribe from the list and the coverage for the insured is the same for both formulary and non-formulary drugs. Completely open formularies are relatively rare today. Closed formularies only allow patient reimbursement for drugs on the list, while non-formulary drugs are not reimbursed.
Some formularies combine elements of open and closed formularies.
Therapeutic categories not included on the formulary have no coverage restrictions. Most managed care plans follow a formal process in constructing a formulary. A committee comprised of physicians, pharmacists and other health care professionals evaluates drugs. 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.