Frozen Formularies Can Raise Drug Costs

March is legislative month in Minnesota, and legislators are considering the concept of “Frozen Formularies,” a proposal supported by the Minnesota Pharmacist Association among many others.

Frozen formularies, by definition, are drug formularies that are mandated to cover certain prescription drugs even when other alternatives are available. The legislation was proposed to prevent PBMs or health plans from making changes to the formulary during the year - in the context of factors such as drug shortages, inflation (like the EpiPen scenario) and more.

While Frozen formularies, by definition, are designed to solve specific patient care problems, opponents see them as fuzzy, ill-conceived and potentially costly. One of such detractors is the Pharmaceutical Care Management Association (PCMA) which recently discussed the projected costs from frozen formularies. (1)

However, PCMA does not stand alone in raising questions about the potential cost of this policy. A recent report released by Milliman shows that frozen formularies could cost the insured commercial market in Minnesota alone an additional $19 million by 2025. (2)  

If passed, this bill would pose expected challenges for payers, employers, and health plans in the coming years as it would remove the flexibility of alternative pricing that results in cost savings for patients and plan sponsors. The bigger consideration, however, is the potential precedence this bill will set, which will send a firestorm around for benefits managers. The more interesting question is what other levers benefits managers would be able to pull to offset losses brought on by this policies like the Minnesota frozen formulary.