The Drug Formulary Death Cage Match of Awesomeness

I got an unusual request last week.  I written a prescription of a generic medication (which has been generic for a couple of years) and the prescription was denied by the insurance carrier.  The reason for denial: I had to try a brand-name medication first.
Stop.  Read that again.  They wouldn\’t allow me to give a prescription for the (cheaper) generic drug because I had to try the brand-name medication first.  This is opposite of the usual reason for denial, the availability of a cheaper alternative than the prescribed drug, and, to my knowledge, is the first time I have ever seen it upside-down like this, and I have been in the ring for the duration of the drug formulary death cage match of awesomeness.  I\’ve seen it all unfold.


Here is what happened.

I am not, like many physicians and patients, against the idea of cost-control through the use of drug formularies.  Medications are very expensive (unnecessarily expensive, as I have discussed previously), and the previously strong influence of drug reps made many doctors quick to jump for the latest and greatest medication.  I did this myself, during the first few years of practice – before the advent of drug formularies.  We were constantly detailed on new NSAID\’s, antibiotics, cholesterol, and blood pressure pills.   There was always a reason the latest drug was worth using over the old one (sounds a lot like fancy smart phones, doesn\’t it?), and since insurance paid the same for brand drugs, I was often influenced by the drug reps.

Round 1 went to drug companies.

Then came the first drug formulary, which, to my initial consternation, told me I could not prescribe whatever I wanted.  The drug class impacted most during that initial wave of formularies was the NSAID (non-steroidal anti-inflammatory drugs, like ibuprofen) class.  I quickly discovered something amazing, however: my patients did just as well on generic Naproxen as they did on the far more expensive brand medications.  Cost savings didn\’t hurt my patients!  What a concept!

This opened my mind toward other generics, which became more bountiful as patents expired.  It became a hard-sell for the drug reps to talk down a drug they had previously touted as the \”next big thing.\”  This got worse for the drug reps when the \”next big thing\” ended up being the \”next big class-action lawsuit,\” with drugs that would interact with every other drug or have toxic effects on internal organs.  Patients became less enamored with new drugs, and less upset with generic substitutes.

Round 2 went to insurance companies.

The game changed once again with the advent of direct-to-consumer advertising for prescription drugs.  \”Ask your doctor if Nexium is right for you!\” the commercial said.  Well, Nexium is an isomer of Prilosec, which used to be the greatest drug invented.  Prilosec, of course, replaced Zantac as both the treatment choice for GI problems and as the greatest drug ever invented.  Both Prilosec and Zantac went generic (and OTC eventually), so drug companies needed a new way to make money.  There was still pushback from insurers and formularies, but with consumer demand created by clever commercials about \”purple pills,\” the pushback was bad for PR.

Round 3 went to drug companies.

But then the goose with precious metal ovulation went into menopause.  Block-buster drugs lost patents, and the \”tweak drugs\” like Nexium (tweak the molecule and get more patent) became less impressive or simply tiresome.  Crestor is great, but Simvastatin is much cheaper and almost as powerful.

Add to this the intrusion of Wal-Mart into the ring, bringing $4 drugs (or cheaper) into the public mindset, and the fight once again took a turn toward the insurers.  It is much harder to get someone to pay $150 per month for something that is 5% better than a $4 drug (or even 25% better).  Drug companies took control and were met with few cries from doctors or patients.

Round 4 went to insurance companies.

This is where things got hazy.  Drug companies, awash in the generic onslaught realized they could not stay alive forever, so they took a new approach: they starting making generic drugs.  I couldn\’t believe that this was legal when this first happened, as the term \”generic\” implies \”non-brand.\”   A company who has simply to change the labels on the drug has a huge advantage over those who must go through all of the FDA steps to produce approved generics, so they automatically took the lead in the market.  This lowered the number of competitors in generic manufacturing, raising the cash price for them significantly.  Hence, the insurance companies were no longer seeing the financial benefits of pushing generics.

Round 5 went to drug companies.

There is more to this fight than what meets the eye.  Behind the scenes in this fight (as is the case with the real purveyors of pugilism) are shady deals going on in smoke-filled rooms.  This is not exactly a mano-a-mano winner gets the prize affair.  The drug companies and insurance companies are engaged in deals to benefit both sides.  The biggest area of behind-the-scene dealing is in the are of drug rebates.  A \”rebate,\” which usually refers to money paid back to the person buying an item, is different in the insurance/drug world.  Drug rebates are paid by the drug companies to the insurers in exchange for advantageous positioning in drug formularies.


I saw behind the scenes on this when I had the \”honor\” of serving on the drug formulary committee for a large insurance company in our area.  In consideration of inclusion on the formulary we were supposed to consider the following:

  1. Is the drug effective for the condition?
  2. Are there other drugs of equal or more efficacy?
  3. What is the cost of the drug?
  4. What is the demand for the drug?

After all were considered, if there was no obvious choice, the subject of \”rebates\” was considered.  Drug companies would pay extra for the following:

  • If their drug was exclusive
  • If it was not exclusive, then rebates were paid based on reaching a certain market share.

1-4 were equal, then rebates were the decision maker.  The problem, of course, is that \”efficacy\” of drugs is never real clear when compared with another (due to the nature of drug studies, head-to-head trials are often unethical or dangerous from a marketing standpoint).  Is Lipitor the same as Zocor or Crestor?  What about $4 Lovastatin, which also lowers cholesterol?  There is seldom enough information to judge them equally, so money comes in to play very early in the process.

In truth, \”rebates\” are probably better re-labeled as what they are: \”kickbacks.\”  You scratch my back, I scratch yours.  They seem to realize this doesn\’t look good, as they are largely kept secret from the public.  How secret?  I was once a part of a physician group who teamed up with an insurance company to lower cost and improve their rolls.  We accomplished both, and were eventually quite profitable.  There was an out clause from the deal that freed them from the partnership if the plan wasn\’t profitable, which they tried to exercise at a time in which the plan was growing and seeming to do well.  They opened their books for us to show us the lack of profit, but insisted that the rebates were not part of the formula (even though the prescribing habits of us physicians were responsible for meeting the quotas).  It ended up going to court, and the judge sided with us, showing a huge profit.  They settled before the numbers went public, so nobody ever did see the actual size of the rebates.

So what about the brand drug that the insurance company favored over the \”generic?\”  Coincidentally, the main generic manufacturer is the same one who makes the brand drug you have to use before changing to generic.  You don\’t have to be paranoid to see a problem with this.  It seems the two fighters have teamed up and are now beating the crap out of whoever challenges them in the ring.  I am not sure who wins this fight in the end, but I know whose money is being spent, so I know who loses.

5 thoughts on “The Drug Formulary Death Cage Match of Awesomeness”

  1. Here’s the scoop from the consumer point of view: I hate my insurance company. Stupid company will cover my cyanocabalamin, but not the syringes I need to inject it. What am I suppose to do, drink it? If I could absorb vitamin B12 in my gut, believe me, I’d get plenty from what I eat. Also, they charge me $7.39 for a three month supply. Publix charges me $4.85 for a three month supply plus the six syringes I use to inject it. (I use different needles to draw than to inject.) Stupid, Inc. will cover Klorcon, but not Mag Ox…they are both electrolytes that I pee out like a sieve. Then they paternalistic “Specialty Pharmacist will call to harass both my doctor and me because they are concerned that I am taking the electrolytes with a potassium sparing diuretic and an ACE. Thank you for your concern. We test often. We adjust where we need to. My doctor is very smart. He’s got it figured out. Paternalistic pharmacist call to remind me that I haven’t requested a prescription without looking to see that I now have the same medication in a different strength or a different dosing pattern. They nag me constantly because I get two of my medications free at Publix instead of paying them $10 every 3 months. Yes, I realize I spend $30 in groceries every time I am waiting on a prescription in exchange for a $4 medication…So what? I only buy items I am going to buy anyway. And they won’t cover the much cheaper Relion test strips because they have a formulary for One Touch…I have to pay $60 a month for them. I get Relion for $39.98. And don’t even get me started on the drugs I took when I was on chemo…all I can say is when someone is that sick, don’t complicate things. Stop with your stupid demands.

    I love Publix and Kroger and especially Walmart for giving me a back door. I love my doctors for knowing where to find those back doors and directing me to them. I spend a huge percentage of my income on medical care as it is. I need every break I can get.

  2. Other formulary issues that drive me crazy…

    While in the aggregate drug A may similar in effectiveness to drug B, in a given individual that may not be the case. I’m one of those unlucky ones who has a lot of problems with side effects, especially with things that can make you sleepy. But I’ve been told that I have to try one drug (which I have tried in the past with terrible side effects, and have documentation to prove it) before I can get the drug that I actually know to work.

    And in some cases, the generics and brand name can have sufficiently different ways in which the ingredients are delivered that it may make a difference. I see a doctor. who is a world expert on a disease that I have. I have a lot of GI issues, and she suggested that I take the brand name Plaquenil, rather than the generics, since she has seen improvement in GI for some when they take the brand name. Despite her advocacy, insurance would simply not approve it, it wasn’t on the formulary. I’m from a Yankee tradition, I’m frugal, and I don’t have to have the “newest and shiniest”. But I would like my insurer to pay for medicines that might actually improve my situation. BTW – the brand name was better for me, and I have to pay for it out of pocket.

    I find it shocking to see the kick back model here – once again, my health care is determined not solely by considerations for health, but by the profit principle.

  3. Not sure how to connect with you via email, so I’ll do this as a comment. You’ve talked about the frustration of the bureaucratic pieces of your job, though you are doing your best to optimize them. The past few days, many of the news feeds I read have been talking about Primary Care Physician burn out. Here’s one link, but google it, and you’ll get a bunch more.

    And I was in my PCP’s office yesterday, asked him how he was doing, and he told me he’d been in the office 6 days last week, was going to do 6 days this week, and that a few of those were 12-14 hour days. He’s one of the good ones, and my heart sank for him, because I know he’s always trying to do his best.

    So…. I suggest two things – talking about burnout in your blog (yours or others), and, think about how you are doing. In other words … you sound stressed, how are ya doing, and don’t forget to take care of yourself. (Advice you might give to others…)

    Enjoy the blog, and as someone who spends too much time with doctors, appreciates that you are trying to do the right things

  4. Charity Singleton

    This was a really helpful post on understanding the intricacies of physician prescribing and how formularies are developed. I think your summary was apt, too, unfortunately. I fear healthcare reform isn’t nearly as much about the patient as it should be.

  5. Of course, now that an entire new industry of “pharmacy benefit management”. has been created, on top of the enormous expense of time on the part of doctors, staff, and patients, it’s a complete fallacy that drug formularies are actually saving any money overall. It’s just a way for another group of parasites to get their share of the pie without adding any value.

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