Common Formulary Exclusion Categories
- Drugs with generic equivalents: Brand drugs when a generic is available
- Lifestyle drugs: Drugs for cosmetic or lifestyle purposes (hair loss, erectile dysfunction)
- Drugs with biosimilar alternatives: Brand biologics when a biosimilar is available
- Drugs with therapeutic alternatives: Drugs when a lower-cost alternative treats the same condition
- Compounded drugs: Custom-compounded drugs when a commercially available alternative exists
- Over-the-counter drugs: Drugs available without a prescription
Exclusion Savings
Formulary exclusions can save 5–15% of pharmacy costs. The savings depend on the drugs excluded and the availability of lower-cost alternatives. Excluding brand drugs with generic equivalents is the highest-value exclusion — generics cost 80–90% less than brand drugs. Excluding drugs with biosimilar alternatives is the second-highest-value exclusion.
Exception Process
Pro Tip
Formulary exclusions must include an exception process for members with medical necessity. A member who has a documented medical reason for needing an excluded drug — allergy to the alternative, prior treatment failure, or physician attestation — should be able to obtain coverage through an exception. A well-designed exception process minimizes member disruption while maintaining formulary integrity.