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The Impact of Custom Formulary Edits Designed for Self-Insured Employers

May 12, 2020 by Matthew Harman, PharmD, MPH

As pharmacy benefit spend continues to grow with the emergence of new and costly medications, payors must continually seek ways to reduce plan costs. Some payors have turned to group purchasing organizations to negotiate with pharmacy benefit managers (PBMs) for optimal pricing and formulary management. While formularies help control the majority of inappropriate spend, some players in the health care space take advantage of gaps in benefit design by promoting expensive combination products, high-cost generics and the dispensing of excessive quantities. Therefore, the clinical team at Employers Health designed custom utilization management strategies to address these gaps at a client level and reduce the potential for spend on low-value medications.

How do these custom edits impact employers?

A research study was completed to assess the financial impact of custom edits implemented by self-insured employers. Table 1 shows the specific clinical edits that were evaluated in the study and number of clients that met the inclusion criteria.

Table 1: Overview of Custom Edits
Custom Formulary Edit Utilization Management Number of Clients Included
Doxepin Step Therapy, Quantity Limit 86
High Cost Generics 1.0 Step Therapy 85
High Cost Heartburn Prior Authorization 70
Jublia and Kerydin Prior Authorization, Step Therapy 27


A retrospective analysis of pharmacy claim data was performed to analyze key metrics one-year pre-implementation and one-year post-implementation of each custom clinical edit. Key metrics included: total utilizers, total prescriptions, gross cost per member per month [PMPM], net cost per member per month [PMPM], total gross cost and days’ supply per prescription.

What did the study find?

Client implementation of custom edits suggested that there was interest to reduce potential spend on low-value products with cheaper, therapeutically equivalent alternatives. In this case study, each custom edit resulted in reduced total spend, fewer utilizers and fewer prescriptions. It is important to note that some clients grandfathered existing utilizers and grandfathering was not accounted for in this study.

From a financial perspective, each edit resulted in savings between the pre-implementation and post-implementation total gross cost for the targeted products. High Cost Heartburn and High Cost Generics 1.0 resulted in the largest program savings with $6.4 million and $4.3 million, respectively. Furthermore, the evaluated programs reduced client trend 2 to 2.5 percentage points on average.

What are the takeaways for employers?

In conclusion, custom utilization management strategies are one effective solution to help control drug spend, in addition to formulary design, at a client level. If a client adopts multiple custom formulary edits on non-specialty and generic medications, then it can result in significant savings over time. These savings can help to curb increased specialty trends.

Custom clinical edits are one of many benefits that Employers Health offers to clients. Clients of Employers Health can be reassured that retrospective pharmacy claims data is continually monitored for trends in inappropriate utilization. This often leads to the development of new custom clinical edits before spend on certain drugs becomes problematic. When custom edits are implemented sooner, the savings compound themselves over time.

Interested in more details regarding this study?

Join us June 24 at our exclusive Virtual PBM Advisor Summit as our clinical team shares analysis and results of custom formulary edits and on August 27 at our Summer Benefits Camp where we will share a pharmacy benefit update on recent changes and the financial impact of custom edits.

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