According to Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)) (HCFA(now known as CMS)) formularies should not generally affect access in State Medicaid programs. Currently, only ten drugs are not approved for reimbursement by HCFA(now known as CMS). These are mainly barbiturates and benzodiazepines. Formulary acceptance is the same for all classes of drugs. In other words, HCFA(now known as CMS) does not apply a different set of criteria required for reimbursement approval to one drug class as opposed to another. HCFA(now known as CMS) monitors state formularies through utilization review.
Occasionally, HCFA(now known as CMS) has taken a pro-active approach toward influencing State Medicaid formularies and policies regarding coverage of particular prescription drugs. For example, a recent letter from HCFA(now known as CMS) to all State Medicaid Directors has urged the inclusion of atypical antipsychotics on Medicaid formularies.25
While the Omnibus Budget Reconciliation Act of 1990 (OBRA 1990) abolished the rights of States to maintain closed formularies for Medicaid, States with previously restricted formularies continued to make fewer drugs available than other States.26 Because many States incurred large increases in costs as a result of this provision in OBRA 1990, States were allowed once again to restrict formularies in 1993. Currently, closed formularies are maintained in 8 States (California, Colorado, Hawaii, Illinois, Michigan, Montana, Ohio, South Dakota). A closed formulary does not necessarily indicate relative restrictiveness.27 For example, Kentucky maintains an open formulary, but includes less than 50% of all FDA-approved drugs in its formulary. Most of the excluded drugs are generics with multiple manufacturers. Our interviews reveal that only Medi-Cal excludes any of the newer antidepressant and antipsychotic drugs. None of the State Mental Health Systems interviewed for this study exclude the newer antidepressant and antipsychotic medications from coverage. Neither State Mental Health systems nor Medicaid programs are required to use therapeutic substitution; however, Medicaid programs are required by HCFA(now known as CMS) to use generic substitution.
The DoD includes all FDA-approved drugs on the formulary for its managed care programs (i.e., TriCare). The formulary in place at the military treatment facilities is closed but providers can prescribe off formulary with prior authorization. TriCare also operates a mail order program via Merck-Medco that uses a preferred drug list that includes a limited number of newer antidepressants and atypical antipsychotics. Additions to the formulary are based on consumer need and cost.
The Veteran's Administration (VA), like DoD, has a closed formulary but allows off formulary prescriptions pending prior authorization. Pharmaceutical additions to the formulary are based on effectiveness, safety, and experience in the VA system.
Formularies are used by over 75% of HMOs, up from less than 50% in 1990 although leveling off from 1993. The trend appears to be toward closing formularies: in 1997, 33% of HMO formularies were classified as "closed" (up from 28% in 1996) and an additional 52% were described at "selective" or "partially closed" (up from 39% in 1996).21,22,28 However, within this trend toward more stringent formularies, physicians appear to have increasing influence over the choice of medications included.24,29
The managed care organizations (MCOs) interviewed for this study varied in their formulary status from open to restricted to closed. Formularies often vary by customer type or customer preference. For example, an MCO may offer several formulary options ranging from completely open to somewhat restricted to very restricted. The choice of formulary is then left to the discretion of the purchaser, such an employer, group, or individual. Larger employers and groups are more likely to choose a more expensive option such as an open formulary. Smaller or extremely cost-sensitive sensitive employers may opt for restricted formulary that is available at a lower cost. Often, the options available to individuals will also include a more restricted formulary. Furthermore, individual clients groups may further restrict or expand the "national formulary" of their providing MCO. MCOs enforce formulary compliance in a variety of ways: physician profiling, claim lockouts, and physician bonuses. MCOs reported difficulty in tracking formulary compliance for mental health drugs due to mis-coding or non-coding of mental illnesses (e.g., depression) at the time of claim submission.
Drug switching reportedly occurs less frequently with mental health pharmaceuticals than with other drug classes. The MCOs interviewed, with one exception, do not endorse active switching; more commonly, MCOs request that the dispensing pharmacist consult with the prescribing physician to discuss alternatives prior to dispensing a non-formulary drug. This latter practice is referred to as "outbound calling." The MCOs interviewed were unwilling to discuss their rationale for targeting specific drugs for outbound calling. However, it is likely that the most frequently targeted drugs are chosen on the basis of high abuse or misuse potential, high volume utilization, safety concerns, or cost.
Employers do not generally get involved with the specifics of formulary management. Most of the employers interviewed stated that they had open formularies. Most employers interviewed reported using the formulary recommended by the MCO or PBM administering their pharmacy benefit. However, one employer reported working with its PBM to expand the options on formulary. Employers leave formulary compliance in the hands of the managed care organizations or pharmacy benefit managers.
The formulary in the New York State prison system is closed, as is that used by the Navajo Region of the IHS. In general, formulary overrides are not permitted, and these payers routinely substitute a formulary drug of the same class for a non-formulary drug, even if that means switching a patient's medication. The New York State prison system reported continuing to encourage the use of generic antidepressants and antipsychotics due to budgetary constraints.