Patient-Centered Formulary & Benefit Design

Health benefit design plays a critical role in patient health, access to care, and larger health system costs. But health benefit design that focuses narrowly on cost containment, without addressing patient needs or increased costs elsewhere, may come with unintended effects.

What is patient-centered formulary and benefit design?

Efforts to expand health coverage in the U.S. have increased the number of people who have health insurance, but many patients still lack meaningful access to medicines. The way benefits are designed can have a significant impact on the ability of insured patients to access care. 

Whether it’s private or public health insurance, most health benefits are designed with “cost-sharing mechanisms” aimed at reducing spending and encouraging careful use of health care services. 

These mechanisms are all designed to shape the health care decisions that patients and their health care providers make and can become barriers to meaningful access. Consumers navigating their health benefits increasingly confront:

  • High-deductible health plans, which require patients to pay more costs out of their own pockets
  • Increasingly narrow formularies, lists of medications that insurers will pay for
  • Complex approval processes, such as prior authorization review or step therapy, which requires patients to try and fail on a less costly medicine before they can access another
Paying for Patient Care: Understanding the Costs and Benefits, Now and Later

What’s the challenge?

All types of benefit design come with both intended and unintended consequences. For example, if a health plan attaches a significant co-pay to certain medications, the (intended) effect may be lower costs for the health plan. But the unintended effect may be that the high co-pay discourages patients from using medications that keep them healthy and out of the hospital – an effect that may be costly and harder to detect by a health plan focused on short-term revenue cycles.

That’s why high-quality research and analysis are needed to help ensure that decision-makers are designing health benefits to achieve good value – resulting in the best possible health outcomes for the dollars spent.

Paying for Patient Care

What should decision-makers know? 

Public and private health plans, pharmacy benefit managers (PBMs), employers all play a decisive role in the health benefits that people access.  

Most benefit and formulary design approaches used by decision-makers are geared to contain drug costs rather than consider individual patient needs and potential cost offsets. For example, costs to the overall health system could be reduced if the patient receives appropriate care and avoids hospitalization. Too often, cost containment is focused solely on reducing drug costs without recognizing other costs and factors related to patient care.

NPC’s resources on patient-centered benefit design can help decision-makers develop benefits and utilization management strategies that promote value, patient health and successful cost mitigation approaches. Visit our dedicated page for employers and other benefit and formulary design decision-makers.

How does our work inform the discussion?

The National Pharmaceutical Council's research has taken a closer look at pharmaceutical access issues, examining a range of topics. Learn more about each.

Resources for Employers

Visit our dedicated page for employers and other benefit and formulary design decision-makers

Employer Resources