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A Formulary is a set of drugs approved for use, on varying levels, by pharmacy benefit managers. Those managers may be a govenrment agency or a healthcare entity. Formularies are established to control cost of medications for members.

Many formularies have tiers which determine the cost of medications to the member. Prescribers are encouraged to prescribe at the lowest tier (typically generic drugs) and members pay a lower co-pay on the lower tier medications. Often there is a second tier of preferred drugs. Typically the co-pay is higher than the generic tier but not full price. If a member is prescribed a medication which is not in the formulary they would typically have no benefit and incur full cost of the medication. These drugs may sometimes be able to be appealed on a case by case basis.

Patients formularies are often not evident to the prescriber or patient and typically only to the pharmacy and the pharmacy benefit managers. Patients often experience this when a prescriber writes a medication and the patient goes to the pharmacy and they are recommended the generic or told the medication is not covered. Depending on the level of help the pharmacy is willing to provide they may often solve the problem. Patients should always ask if there is a covered drug and if necessary call the provider to change the prescription. Un-informed patients can cost themselves un-necessarily by not knowing. Prescribing within a formulary is aided greatly by e-prescribing solutions that are able to encourage formulary compliance at the point of writing the prescription.