Exchange Rx Formularies: How Open Will They Be?

By Neal Learner - June 4, 2013

Pharmaceutical formularies on the insurance exchanges next year are expected to offer consumers a relatively generous choice of medications. But those drug lists likely will become more restrictive, and consumers could be required to fill their prescriptions through a limited pharmacy network, in subsequent years as plans implement strategies to ratchet down costs. Furthermore, the formularies are likely to vary widely from state to state.

While questions remain on how insurers must design their pharmacy benefits for the exchange, one known fact is that all plans must provide the same breadth of drugs on their formularies as the one offered in the state’s “benchmark plan” — i.e., a commercial plan selected by the state, or the largest small-employer plan in the state, that determines the minimum level of so-called “essential” benefits.

Benchmark plan formularies will vary greatly from state to state, says Caroline Pearson, a director at consulting firm Avalere Health LLC. For instance, 12 states now require the benchmark plan to cover more than 97.5% of all unique chemical entities. But another 12 states have requirements that range from 54% to 84% of all unique chemical entities, according to Avalere research.

“You start to see some really significant state-to-state variation in terms of what minimum coverage is going to look like,” Pearson told a May conference in Arlington, Va. “We’re going to have states that have uniformly open formularies, and everything will be on at some tier, and then you’ll have states where you could see a much stricter management among the health plans. Thinking about the national carriers, they’re going to need to target their strategies on a state-by-state basis.”

Mark Merritt, president and CEO of the pharmacy benefit manager trade group Pharmaceutical Care Management Association, says he expects formularies on the exchange at first will mirror those in the commercial world. Where he does see a likely change is in the advent of pharmacy networks, which would require patients to fill prescriptions at certain drugstores to get coverage. “There is enormous potential to save millions of dollars with more efficient pharmacy networks in the exchanges,” Merritt says. “It’s a new trend you’re going to see a lot more of over the next few years.”

Brian Bullock, CEO of The Burchfield Group, a pharmacy benefit consulting firm, says that he’s hearing health plans might operate on a relatively open formulary and open network in 2014. But that could change in the next year. “They may have some options to experiment with limited networks and restricted formularies,” he says. “But I don’t think you’ll see great migration in that direction until 2015.”

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