Moving Towards Better Formulary Management

Published in: The American Journal of Managed Care, v. 11, no. 1, Jan. 2005, p. 13-14

Posted on RAND.org on January 01, 2005

by Dana P. Goldman, Geoffrey F. Joyce

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Drugs have been shown to be very cost-effective treatments for chronic illness; they forestall complications, reduce attendant medical utilization, and make patients more productive. Tiered copayments are ill-suited for the latest high-cost drugs. Formulary decisions are often made on the basis of ingredient costs and manufacturer rebates rather than clinical outcomes. Decisions are based on aggregate measures without tailoring to each patient's circumstances. The result is that plans are designing formularies that are socially wasteful, and that patients perceive as overly intrusive. Proposed solutions include creation of individual health savings accounts (HSAs) that can be used to pay for medical care, including outpatient drugs. Health savings accounts are predicated on consumers being well-informed about the net benefits of treatment. The challenge for benefit managers is to make patients more sensitive to the cost of treatment without encouraging them to forego cost-effective care.

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