What is a formulary?
List of approved drugs used to treat patients in a drug benefit plan. Products listed on a formulary are covered for reimbursement at varying levels.
There are three common types of formularies.
- Open: Nonformulary products are covered at a defined level in the benefit.
- Closed: Nonformulary products are not covered for reimbursement in the benefit.
- Incented: Formulary products are classified for reimbursement by product type including brand, generic, specialty, lifestyle, preferred, and nonpreferred. Incented formularies are increasingly popular because, when aligned with rational cost sharing levels, they help drive utilization to the lowest net cost drugs.