A drug exclusion list is a list of medications that will not be covered by a health plan for any reason. The drug is not on formulary and there are no loopholes to gaining approval. 

What is a formulary? 

A formulary is a list of prescription drugs covered by a prescription drug plan or another insurance plan offering prescription drug benefits. It is also called a drug list. Each insurance plan has its own formulary. Drugs are tiered for co-payment. Typically,

  • Tier 1 is preferred generic
  • Tier 2 is non-preferred generic
  • Tier 3 is preferred brand
  • Tier 4 non-preferred brand
  • Tier 5 are specialty drugs

Additionally, formulary may have further restrictions such as prior authorization, step therapy, and/or quantity limit. 

However, there are some medications that are excluded from being paid entirely with no exceptions. This is a drug exclusion. The goal of a drug exclusion policy is to reduce costs by limiting patient access to an expensive drug for which there is a more cost-effective alternative.

Plan Expectations of Exclusion

For example, CVS Caremark expected the changes in 2021 formulary to save $4.4 billion — $130 per member — for clients aligned to their template formulary. Nevertheless, the use of formulary exclusion lists has been expanding and limiting patient access. For example, when CVS first published its exclusion list in 2012, it contained 38 drugs across 18 therapeutic classes. The 2016 CVS Caremark exclusion list has grown by 3.5 times and included 134 drugs across 51 classes.

Determining Drug Exclusion and Inclusion

Express Scripts stated that formularies are based on clinical appropriateness and objective evaluations from independent physicians. Many pharmacy benefit managers (PBMs) develop formulary exclusion and inclusion criteria based on expert committees from various healthcare settings. 

For instance, Express Scripts develops formularies through a four-step process. This process involves the work of three distinct committees: Therapeutic Assessment Committee, National Pharmacy & Therapeutics Committee, and Value Assessment Committee. The formulary development process assesses clinical appropriateness of the drug and evaluations of independent physicians. While keeping in mind that the prescribing physician makes the final decision regarding the drug therapy of an individual patient.

Plan sponsors of PBMs usually adopt the PBM-developed formularies or use them as the foundation of their own custom formularies. After taking clinical considerations into account, plan sponsors consider cost in making their formulary choices. More discounts are available from manufacturers when there are fewer preferred drugs. This higher volume and discount system lowers the cost to the plan sponsor.

The Power of the PBM

CVS and Express Scripts serve as two of the largest pharmacy PBMs in America. PBMs use formulary exclusion lists as a tool to manage the rising costs of medications. From 2014-2017, the exclusion list between both PBMs increased by 160%. Exclusion lists often included those with generic alternatives or drugs with disproportionately high inflation. 

Insurance plans decide exclusion lists

However, sometimes branded drugs from competitive therapeutic classes in which there are multiple drug options were also excluded. For example, CVS Caremark, Express Script, and OptumRx all excluded Nesina, Onglyza, and Tradjenta and replaced it with Januvia. Although the excluded drug was often replaced with a drug within the same therapy class, they may not have identical safety, efficacy, or metabolic profiles, and some patients may respond differently to them.

In addition, drug exclusion policies may negatively impact patient adherence, which, in turn, can lead to compromised disease management. What may seem like a “small” change to PBMs, may cause life-changing effects on the patients who are forced to change their regimen.

The Benefits of an Exclusion List?

PBMs argue that the intention of formulary lists is to help patients by reducing the cost of spending on prescription drugs. However, these insurance exclusion lists may actually be limiting patient access to therapies.

The Doctor-Patient Rights Project published a report in 2017 which highlighted that patients with cancer, patients taking anti-diabetics, and low-income minority groups are most affected by the growing exclusion lists.

The lists are meant to give notice ahead of time of treatments which may no longer be covered in the upcoming year. However, many times, PBMs make changes to the exclusion list in the midst of a coverage year. Thus causing many patients who have been stable on their treatment plans to abruptly lose access to their medication. This has led to many having adverse events, becoming less adherent by taking less frequent doses, or stopping their treatment altogether. These growing formulary exclusions lists leave patients vulnerable.