The impact of a national formulary expansion on diabetics

Abstract

Prescription drug formularies are an element of health insurance plan design that determine coverage and coinsurance rates for medications. Formularies are an important mechanism for healthcare cost containment that can increase the bargaining power of insurance companies in their negotiations with pharmaceutical manufacturers over the price of prescription drugs. The complexity of insurance plan design in settings such as the U.S. healthcare market and insurers' discretion over the elements of that design make it difficult to assess how changes in prescription drug coverage impact consumers. Evaluating changes in formulary design when such changes are endogenous choices of the insurer usually requires a structural approach as well as information on all other plan characteristics. While expanded coverage might increase prescription drug costs, spillovers from drug to non-drug spending raise the possibility that adding drugs to a formulary might decrease healthcare costs overall. For instance, Tamblyn et al. (2001) show that the rate of adverse health outcomes and emergency room visits increase among poor and elderly individuals following an increase in cost sharing for essential prescription drugs. Understanding how formulary design impacts healthcare costs and utilization is of great concern to countries like Canada, Mexico, Japan, Colombia, and the U.S. where prescription drug spending comprises more than 10% of total healthcare costs (OECD, 2020). Also of keen interest is how insurers' ability to respond to exogenous changes in formulary design impacts enrollees.

Investigating physicians’ views on non-formulary prescribing: a qualitative study using the theoretical domains framework

“…What is clear, however, is the strong consensus that continuous monitoring of NFD prescribing and periodic review of trends are essential parts of formulary management [ 56 ]. Beyond this, recent studies have advocated for the transition to more relaxed formularies, with expansion of the number of formulary items within selected drug classes in order to avoid the increased workload burden associated with the process of prescribing NFDs [ 55 , 57 – 59 ]. However, there is likely to be considerable resistance against this approach.…”