Drug formularies are fundamental to the plan design process. A carefully constructed formulary helps promote using safe, effective medications while minimizing overall costs for patients and the plan. The Authorization System gives you the ability to make formularies as restrictive or permissive as needed. A closed formulary is at the more restrictive end of the spectrum.

In this article we’ll go over:

• how to establish a closed formulary;
• how to add an approved drug to the formulary; and
• a comparison of authorization elements.

Article Contents

How to Establish a Closed Formulary

Establishing a closed formulary is straightforward and can be accomplished using a single Global authorization. The Global authorization is meant to put a hard stop on any drugs that are not pre-approved.

The Global authorization should have the following elements:

1. an action that captures what the authorization’s intended function is, such as on formulary(ONFORM) or allow drug (DRUG);
2. an NCPDP rejection code to stop a claim from processing if warranted;
3. a large authorization number (A/N), such as those at the high end of your A/N hierarchy and/or those used for plan defaults.

This table shows an example of a Global authorization as described above:

Key: A/N = Authorization Number, N = No, ONFORM = On Formulary, Y = Yes

🛈 Note: Dashes are included in authorization numbers (A/Ns) to aid in readability. Do not include dashes when entering A/Ns into the Authorization System interface.

Adding Approved Drugs to the Formulary

Every approved drug needs its own authorization. The system’s Excel feature is generally used for bulk uploads of formulary drug lists, but approved drugs can also be manually added. Either way, there are a few criteria to be mindful of when creating this or any other kind of approval authorization:

• A/Ns must be smaller than the A/N on the plan default to avoid an intentional rejection;
• Selections must be specified. NDCs and GPIs are commonly used for drug approvals.
• The action code on the approval authorization should match the action code on the rejection authorization.

The table below shows an authorization for an approved drug on the formulary, Hydroco/APAP, followed by the existing Global authorization.

Key: A/N = Authorization Number, N = No, ONFORM = On Formulary, Y = Yes

That’s it! There is now an approved drug on the formulary. Repeat this process for each approved drug. Although Global authorizations are used in the example, an authorization could be added at the Patient level to approve a drug for a specific patient or at the Group level for an entire group.

Authorization Comparison

Some authorizations are allowances, while others denote limits. Either way, there is a rationale for every decision associated with creating an authorization. Before we wrap up, let’s take a moment to compare the authorizations described in this article and the reasons for certain choices made.

Actions

We assigned the same action code to the authorizations in our scenario (i.e., ONFORM-On Formulary) because both are used to manage the drug formulary. Having the same action code allows the authorizations to interact.

🛈 Note: Authorizations with the same action code will interact and override each other.

A/Ns

The Authorization System goes through authorizations with the same action code in ascending order according to A/N during claims processing. The authorization with the smallest A/N takes priority or “wins.” In our current scenario, A/N 79999-999 would be checked first. Claims submitted with a matching GPI code will be processed while A/N 89999-999 will cause claims with a different GPI to reject.

Selections

Keeping the selection fields blank on A/N 89999-999 makes it applicable to all incoming claims. Alternatively, A/N 79999-999 is an approval for a specific drug. The selection is specific to the approved drug and nothing else. Other parameters, like cost or day supply, should be managed in separate authorizations.

Rejection Code

Currently, an authorization with a rejection code must be in place to cause a claim to reject. The system does not automatically generate rejection authorizations when an approval is created. Trying to manage a limitation and allowance in the same authorization is also not recommended. Doing so could cause unintentional approvals and/or rejections. The best way to make sure claims process or reject as planned is to create separate authorizations for approvals and rejections.

This graphic highlights some of the similarities and differences between authorizations described in this article.

Contact Support

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For plan-specific or urgent needs, contact your account manager directly.

For general Authorization System questions, contact EHO360 Operations at ops@ehorx.com