Formulary Design Conflicts
PBM formulary design is influenced by rebate revenue. A drug with a high list price and a high rebate may be preferred over a clinically equivalent drug with a lower list price and lower rebate — because the PBM earns more from the high-rebate drug. This conflict of interest can result in formularies that maximize PBM revenue rather than minimizing employer cost.
Formulary Exclusions
PBMs may exclude lower-cost drugs from formularies to protect rebate revenue. If a manufacturer offers a lower-cost alternative to a high-rebate drug, the PBM may exclude the lower-cost alternative from the formulary — protecting the rebate revenue from the high-rebate drug. Employers who review their formulary exclusions may find drugs excluded for financial rather than clinical reasons.
Independent Formulary Review
Pro Tip
An independent formulary review — conducted by a clinical pharmacist or pharmacy consultant who is not affiliated with the PBM — can identify drugs that are preferred for financial rather than clinical reasons. The review compares the formulary to evidence-based clinical guidelines and identifies opportunities to substitute lower-cost alternatives. Independent formulary reviews typically identify 5–15% savings opportunities.