Closed and open formularies describe an administrative classification of drugs that will affect the average patient rarely, if ever. The exception occurs when your doctor wants you to take a nonformulary prescription drug instead of an available generic. You should know the difference between closed and open formularies and make an effort to find out which type of formulary your drug plan employs.
Formulary
All managed-care prescription drug plans have a formulary that names the prescription drugs the program covers. Managed-care companies classify brand-name drugs for which generics exist as nonformulary drugs. Open formulary companies put nonformulary drugs in their formulary's top tier. You can buy a nonformulary drug from within an open formulary plan, but you will pay more for it.
In a closed formulary, your plan will not, without a special exemption, cover any part of the cost of nonformulary drugs.
Tiered Formulary
Most insurance companies have open formularies and organize them into a three tiers. A tiered formulary offers its lowest co-pay for generic drugs (tier 1), charges more for tier 2 brand-name drugs (no available generic) and significantly more for nonformulary drugs (tier 3).
Brand-Name Drugs
Pharmaceutical companies patent drugs. The patent gives the company competition-free time to recover its research and development costs before the drug can become generic. Eventually, patents expire and competitors (often including the originating company) begin marketing less expensive generic equivalents of the drug to compete with the brand on price rather than benefit (all the products have the same benefit).
Marketing Continues
Just because the originating company now has competition, doesn't mean it will shrug and walk away from the market. A company with a well-known trademark for its medications will keep right on working to differentiate its brand from available generics. Their objective is to convince prescribing physicians and users to ask for the drug by name. The more effectively a company creates this demand, the more likely a closed plan will be to remove the drug from its formulary.
Does It Matter?
Bill Barr, writing on the PharmRep website, makes a valid point when he says "... in reality, even the most tightly controlled plans have mechanisms whereby a patient can get nonformulary products. Pharmacies typically include a medical exception process to ensure patients have alternatives available. ... Even open formularies implement some controls to drive formulary product utilization."
The fact that a plan calls itself open or closed should matter little to the user. There are no managed-care plans that will withhold a drug that your doctor says, and can demonstrate, you require.
Tags: nonformulary drugs, open formularies, plan will, available generic, brand-name drugs