Formulary
A formulary is a list of prescription drugs approved for coverage by a health insurance plan, pharmacy benefit manager (PBM), or healthcare institution, organized into tiers that determine patient cost-sharing.
Exam Tip
Formulary = approved drug list with tiers. Tier 1 = preferred generics (lowest copay). Know that prior authorization and step therapy are formulary management tools on the ExCPT.
What Is a Formulary?
A formulary is a managed list of medications that an insurance plan, PBM, or hospital has approved for use. Formularies control drug costs by encouraging the use of preferred medications (typically generics and cost-effective brands) through tiered copay structures.
Formulary Tier Structure
| Tier | Drug Type | Typical Copay | Example |
|---|---|---|---|
| Tier 1 | Preferred generics | $5-15 | Metformin, lisinopril, atorvastatin |
| Tier 2 | Non-preferred generics / Preferred brands | $25-50 | Certain brand-name drugs with no generic |
| Tier 3 | Non-preferred brands | $50-100 | Brand medications with generic alternatives |
| Tier 4 | Specialty drugs | 20-33% coinsurance | Biologics, injectables, cancer drugs |
Formulary Status Types
| Status | Meaning |
|---|---|
| Preferred | On formulary, lower copay |
| Non-preferred | On formulary, higher copay |
| Prior authorization required | Must get approval before dispensing |
| Step therapy | Must try a lower-tier drug first |
| Quantity limits | Maximum quantity per fill/time period |
| Not covered | Patient pays full cost |
Who Manages Formularies?
| Entity | Role |
|---|---|
| P&T Committee | Pharmacy and Therapeutics Committee reviews and approves drugs |
| PBM | Pharmacy Benefit Manager administers the formulary for insurers |
| Pharmacist | May recommend therapeutic alternatives when drug is non-formulary |
Impact on Pharmacy Technicians
- Checking formulary status during prescription processing
- Identifying when prior authorization is needed
- Communicating formulary alternatives to the pharmacist
- Understanding tier structure for patient cost counseling
- Processing formulary exception requests
Exam Alert
Formulary knowledge is tested in the Dispensing Process domain. Know the tier structure (Tier 1 = preferred generic = lowest copay), what prior authorization means, and the role of the P&T Committee in formulary management.
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Study guide on MometrixRelated Terms
Adjudication (Pharmacy)
Adjudication is the real-time electronic process by which a pharmacy submits a prescription claim to a patient's insurance plan and receives an immediate approval, rejection, or request for additional information.
Prior Authorization (PA)
Prior authorization is a requirement by a health insurance plan that a prescriber obtain approval before a specific medication, procedure, or service will be covered, used to ensure medical necessity and manage costs.
Drug Utilization Review (DUR)
Drug utilization review (DUR) is a systematic process of evaluating prescription drug use to ensure medications are used appropriately, safely, and effectively, as mandated by OBRA-90 for Medicaid patients.
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