Health Insurance Company Formularies

Every health insurance company publishes a list of prescription drugs that it has approved for use by members of its various health insurance plans. This list is known as the formulary.

Formularies vary from health care insurance company to health care insurance company, and from one plan to another within a company. All formularies cover certain basic drugs, but formularies can differ when it comes to newer drugs.

Most health insurance plans offer members three kinds of drugs:

Generic

After a pharmaceutical company’s patent on a drug has expired, any other drug manufacturer has the right to produce drugs using the same chemical composition. These drugs are called generic drugs. They are known by their chemical names, rather than the original company’s brand name, but the packaging often includes the words “compare to” and then the brand name.

Because the generic drug companies do not need to pay royalties on the patent or to spend money on developing new drugs, generic drugs cost less than the brand name drugs.

People who use prescription drugs can save money by switching to generic versions of the same drug.

Formulary

Formulary drugs are drugs that a health insurance company prefers to make available to its plan members based on the drug’s effectiveness, its lack of side effects, or its pricing from the manufacturer.

The majority of formulary drugs are brand name drugs

Health insurance plan formularies may include both generic drugs and brand name drugs

Because drug companies reach many potential customers at once when added to a health insurance company formulary, the drug makers often offer health insurance providers large discounts on their brand name drugs

Non-formulary

Drugs that have not been included on a health insurance company’s formulary are known as non-formulary drugs

Non-formulary drugs usually are brand name drugs for which there are generic substitutes or other brand name drugs that can be prescribed for the same condition at a lower price or with greater effectiveness.