Understanding Formulary Management in Pharmacy

What Is a Formulary?

A formulary is a list of medications approved for coverage by an insurance plan or institution. Formularies are developed by Pharmacy and Therapeutics (P&T) committees that evaluate drugs based on clinical evidence, safety, and cost-effectiveness.

Most insurance formularies use a tiered system. Tier 1 typically includes low-cost generics with the lowest copay. Tier 2 includes preferred brand-name drugs. Tier 3 contains non-preferred brands with higher copays. Specialty medications may be on Tier 4 or 5 with the highest cost-sharing.

Formulary Restrictions

Common formulary restrictions include prior authorization (PA), step therapy, and quantity limits. Prior authorization requires the prescriber to get approval before the insurance will cover a medication. Step therapy requires patients to try lower-cost alternatives first.

When a prescribed medication is not on formulary, the pharmacy technician should inform the pharmacist, who may suggest a therapeutic alternative or help initiate a PA request.

Study and Test

Formulary concepts are tested in the pharmacy operations section of the PTCB exam. Review with our flashcards and take mini exams for practice.