Skip to main content
Blue @ Work

3 ways to structure your formulary

Open, closed, or value-based

With 10 cents of every dollar spent on care going toward your employees' medications, prescription drugs make up a large portion of your health care investment. While you don’t have control over rising drug prices, you do have some control over your formulary, or drug list Opens in a new window. The way you tailor your formulary can have a significant impact on your pharmacy spend.

Open formulary

In an open formulary, your employees have the broadest access when it comes to filling their prescriptions. All drugs that appear on an approved drug list, regardless of tier, are covered as part of their prescription benefits. Most drug classes have multiple generic options that are just as safe and effective as their pricier, brand-name alternatives, but because doctors often prescribe brand-name drugs, your employees may not know if there is a less expensive option available. And, when brand-name drugs and their generic equivalents are available on the same tier — for the same copay — you're paying the cost difference with every refill.

Closed formulary

With a closed or limited formulary design, you can restrict access to certain brand-name or higher-tier drugs to help bring down your overall pharmacy spend. There are closed formulary designs that only cover generics and others that just limit access to the most expensive drugs. You can also design your formulary to allow access to preferred drugs over non-preferred drugs, regardless of tier. When moving to a closed formulary design, you can tailor access based on the needs of your employees.

With a closed formulary, your employees will need to request a formulary exception Opens in a new window if their drugs aren't covered. And, if they choose to continue filling brand-name prescriptions when a clinical equivalent is available, you can shift the cost difference between the generic equivalent and the brand-name drug to them — called a product selection penalty. This move, to establish lower-cost drugs and generics as “first-choice” therapies, can effectively manage pharmacy spend while ensuring your employees have access to the treatment options they need.

Value-based formulary

This type of formulary is for employers looking to make a long-term investment in their employees’ health. It’s a new, innovative option that was created to better manage the rising cost of drugs. The value-based formulary emphasizes a drug's true value Opens in a new window by taking into account its safety, effectiveness and relative cost. Preventive drugs are on the lowest tier, which means they are the highest value at the lowest cost. If there are multiple drugs that treat a specific condition, like diabetes, each is evaluated for its true value and assigned to a different tier. Specialty drugs Opens in a new window are spread throughout the formulary depending on their true value, instead of being placed on the highest or specialty-only tier like in a traditional formulary.

See image description

What it is.

An open formulary is where all drugs on an approved drug list are covered.

A closed formulary is where some drugs on an approved drug list are covered; you choose the access level.

A value-based formulary is where drugs are assigned to tiers based on their true value, or safety, and cost effectiveness.

What you get.

With an open formulary, you get convenience for your employees.

With a closed formulary you get primarily generic medications: Maximum amount of cost savings.

With a closed formulary you get access to select brand-name drugs: Less disruption for your employees.

With a value-based pharmacy, you get long-term investment in your employees' health.

Make regular adjustments

If you haven't reviewed your pharmacy benefits in a while, it might be a good time to start reviewing them on a regular basis to maximize your cost-savings potential. The more managed your pharmacy plan is, the more you'll save. Learn about different formulary designs and get advice on the best options for your benefits goals. Contact your Wellmark representative or email us at Send Email.