Medicare Drug Plan Formularies

Most Medicare drug plans will use "formularies," comprehensive lists of the drugs they cover, to define their drug benefits. Each drug plan will develop its own formulary. Medicare drug plans must include at least two drugs in each category and class it designates, although the Centers for Medicare & Medicaid Services (CMS) may require plans to include more than two drugs for some categories and classes. Plans may use or refer to a model created by the United States Pharmacopoeia (USP) in setting up their formularies, but are not required to do so. The USP's model formulary contains 146 unique therapeutic categories and pharmacologic classes.

CMS must review and approve all Medicare drug plan formularies. CMS evaluates the formularies for adequacy of access to medically necessary drugs and to make sure that no groups of Medicare beneficiaries will be discouraged from joining a plan due to a discriminatory formulary. For example, CMS would not approve a formulary if it did not include insulin and oral anti-glycemic agents, as such a formulary would discriminate against people with diabetes.

Medicare's guidance on formularies states that "a formulary is more than a list of approved medications. A formulary must consist of drugs that will provide patients with a clinically appropriate medication for the course of treatment established by a physician." But because formularies are a means to provide access to medically necessary treatments and contain costs, Medicare drug plan formularies will include both generic and brand name medications among their covered drugs.

II. Learning About Medicare Drug Plan Formularies

Medicare drug plans must make information about their formularies available, including how to obtain a copy of the complete formulary. Beneficiaries can obtain a drug plan's list of covered drugs by calling the plan or visiting its website. Medicare will also post the information on its website at http://www.medicare.gov. Plans must provide beneficiaries with an abridged formulary at least at the time of enrollment and annually thereafter. Moreover, plans must provide this information to Medicare beneficiaries by posting it on the plan's Web site and making it available to customer services representatives staffing the plan's toll-free telephone service. CMS provides a model abridged formulary to guide plans. CMS also provides a model comprehensive formulary to plans. Upon request, the comprehensive formulary must also be made available.

III. Prescription Drugs a Medicare Drug Plan MUST Cover

Covered Medicare Prescription Drugs include any of these if they are used for a medically accepted indication:

Drugs dispensed only by prescription and approved by the FDA
Biological products dispensed only by a prescription, licensed under the Public Health Service Act (PHSA), and produced at a facility licensed under the PHSA
Medical supplies related to the injection of insulin (e.g., syringes, needles, alcohol swabs, gauze)
Vaccines licensed under the PHSA
Insulin and supplies required for administration of insulin

According to CMS Medicare drug plans must provide access to "all or substantially all" prescription drugs from the following six treatment categories in their formularies.

Antidepressant medications
Antipsychotic drug medications
Anticonvulsant drugs
Anticancer drugs
Immunosuppressant drugs
Antiretroviral medications

CMS acknowledges that patients being treated for diseases in these six categories are predicted to have some of the highest drug and medical costs among all Medicare beneficiaries yet has stated that it recognizes that patients being treated with a drug from one or more of these six categories have special needs for uninterrupted therapies with drugs that have proven therapeutic effectiveness for these individuals. This formulary directive aims to substantially reduce any attempts by Medicare drug plans to discriminate against these patients (i.e., cherry-picking).

CMS defines the expression, "all or substantially all" as follows:

Substantially all" in this context means that all drugs in these categories are expected to be included in plan formularies, subject only to the specific exceptions noted below. While patients newly prescribed to certain treatments in these six categories may be subject to utilization management techniques, CMS requires that plans proposing to use such techniques as prior approval, generic substitution, etc. on those patients already stabilized on specific drugs "demonstrate extraordinary circumstances" for their ruling. See also http://www.cms.hhs.gov/pdps/formularyqafinalmmrevised.pdf.

There are a few exceptions to the "all or substantially all" standard. Medicare drug plans are allowed to exclude from their formularies:

Iressa (a cancer drug that is used for patients with non-small cell lung cancer who have not done well on other medicines but that has not been shown to extend life); and
Fosphenytoin (an anticonvulsant medication that is usually injected to control seizures and is usually used only for a short time when other anti-seizure medications cannot be taken orally--such as during brain surgery--or are ineffective)

Moreover, Medicare drug plan formularies:

May exclude either Escitalopram (brand name Lexapro) or Citalopram (brand name Celexa), (two antidepressants), but not both, and
Need not include multi-source brands of identical molecular structure, extended-release products, or all dosages.

With the exception of most antiretroviral drugs, patients newly prescribed one of the drugs in these six categories of medications may be subject to utilization management techniques, such as prior approval, quantity limits, step therapy or generic substitution, however, CMS requires that plans which use utilization management techniques for enrollees stabilized on specific drugs "demonstrate extraordinary circumstances" for use of such techniques in their formulary rules.

Antiretroviral drugs are generally not to be subjected to utilization management, except for:

Fuzeon (a brand name for enfurvitide, a drug used to control HIV). Fuzeon (which may also be called T-20 or Pentafuside) must be on all formularies but prior authorization may be required for first-time users.

Medicare drug plans may not have any way of knowing that an enrollee has been using a drug in one of these six categories and is not a new user of one of these medications. Patients, their doctors, and other advocates may need to bring this to the attention of Medicare drug plans in order to assure access to the prescribed medication.

IV. Prescription Drugs a Medicare Drug Plan May Cover

Medicare drug plans may cover any brand name or generic drug that is not specifically excluded from the program. Plans need not, however, include all prescription medications in their formularies. CMS says that the drug plans must make sure that people who join the plans have access to all medically necessary drugs. CMS written guidance requires that drug plan formularies "ensure that beneficiaries have access to a broad range of medically appropriate drugs to treat all disease states…." If a Medicare drug plan decides not to provide or pay for a medically necessary drug that has been prescribed for a beneficiary, the law established procedures for beneficiaries to contest the plan's decision, (see Help! I Couldn't Get My Prescription Filled).

V. Limits a Medicare Drug Plan Can Place on Drugs in Its Formulary

Medicare drug plans can use a number of "utilization management tools" that are in common use by other drug plans in the private sector, in state Medicaid programs, and in Federal Employee Health Benefit plans. These tools include:

Prior authorization procedures
Step therapy
Quantity limitations
Generic substitution
Cost sharing tiers
- If a plan uses cost sharing tiers, a pharmacy may waive the beneficiary cost sharing on a case-by case basis. The pharmacy may not publicize its practices related to waiving cost sharing, and must ascertain that the beneficiary cannot afford the cost sharing.

Utilization management tools may affect access to certain drugs. Prior authorization procedures require the patient's pharmacist to seek the plan's approval before dispensing a medication, along with providing information that justifies the medical need for the drug. Step therapies require patients to use a less costly medication on the plan's formulary before advancing to a more costly drug. Quantity limits preclude the dispensing of more than a specified amount of a drug at one time (i.e., a patient is only allowed 30 pills regardless of how many the physician has prescribed). Plans using cost sharing tiers charge lower co-payments for "first tier drugs" and increasingly higher co-payments for "preferred" but more costly drugs in second, third and fourth tiers. Medicare Drug Plans may use up to ten tiers. If a Medicare Drug Plan decides not to cover a drug because of the application of a utilization management tool, coverage determination remedies are available (see Help! I Couldn't Get My Prescription Filled).

VI. Prescription Drugs Excluded From Medicare Drug Coverage

Medicare drug plans do not cover drugs that a person receives under Medicare Part A as a hospital or Skilled Nursing Facility (SNF) inpatient and drugs that a person receives under Medicare Part B. These include certain immunosuppressants following organ transplants, many chemotherapy drugs and anti-emetics that are often prescribed in conjunction with anti-cancer agents.

In addition, certain drugs generally may not be covered by a Part D plan [1]. These drugs include:

Drugs prescribed for weight-loss or weight-gain
Drugs prescribed for the symptomatic relief of coughs and colds
Prescription vitamins, with the exception of prenatal vitamins and fluoride
Over-the-counter drugs, with the exception of insulin
Drugs prescribed to promote hair growth
Fertility drugs
Drugs prescribed for cosmetic purposes
Prescription drugs that must be monitored by testing services that only the manufacturer provides, such as certain anti-psychotic medications
Barbiturates (drugs used to control seizures or used for sedation or anesthesia such as Phenobarbital or Nembutal®)
Benzodiazepines, often referred to as minor tranquilizers, used to treat anxiety or insomnia (such as Xanax®, Valium® and Ativan®)
Erectile dysfunction drugs, when prescribed for the treatment of sexual or erectile dysfunction [2]

VII. Changes to a Medicare Drug Plan's Formulary

Medicare drug plans may only change the therapeutic categories and classes in their formularies once each year. They may, however, add or delete drugs on their formularies, or change drugs from one tier to another, on a monthly basis. The plans must notify CMS as these changes occur. The plans also must give 60 days notice to beneficiaries whose drug is removed from the formulary or whose costs are changing because of a shift in a drug's tier placement. If the plan does not provide prior notice, it must authorize a 60-day fill of the drug and provide notice at the point of sale. Plans may not remove drugs from the formulary during the Annual Election Period (November 15th through December 31st each year), nor during the first 60 days of the plan year.

[1] Enhanced Medicare drug plans may opt to cover drugs specifically excluded by Medicare as an extra benefit.
[2] For Contract Year (CY) 2006 Erectile Dysfunction (ED) drugs met the definition of a Part D drug and were available on Plan Sponsor formularies. On October 26, 2005, Section 1860D-2(e)(2)(A) of the Social Security Act was amended to exclude ED drugs when prescribed for the treatment of sexual or erectile dysfunction, for CY 2007 and beyond. Please see the CMS Q&A on ED drugs for more information.