Formulary Exception

If a plan utilizes a formulary to manage its Part D drug benefits, it must have procedures in place that ensure enrollees have access to Part D drugs that are not included on its formulary.

Formulary use includes the application of cost utilization tools, such as:

 
1.
A dose restriction, including the number and/or dosage form, that causes a particular Part D drug not to be covered for the number of doses prescribed,

 
2.
A step therapy requirement that causes a particular Part D drug not to be covered until the requirements of the plan’s coverage policy are met, or

 
3.
A therapeutic substitution requirement.

Note: Not all complaints about a plan sponsor's application of costs utilization tools should be handled through the formulary exceptions process. If an enrollee is merely complaining about the existence of a utilization management requirement, the complaint must be handled through the grievance process. If an enrollee is attempting to satisfy a utilization management requirement, the plan must handle the complaint through the coverage determination process. However, if an enrollee argues that a utilization management requirement should not apply in his or her situation because one of the three factors discussed below exist, the plan sponsor must process the complaint as a request for a formulary exception.

A plan is not required to process an enrollee’s request for a formulary exception until the enrollee’s prescribing physician provides a supporting statement demonstrating one of the three factors discussed below. The physician may provide either a written or an oral supporting statement. If the physician provides an oral supporting statement, the Part D plan sponsor may require the physician to subsequently provide a written supporting statement demonstrating one of the three factors discussed below. The plan sponsor's request must explicitly state that the physician is required demonstrate one of the three factors discussed below in the written supporting statement. The Part D plan sponsor may also require the prescribing physician to provide additional supporting medical documentation as part of the written follow-up. If the plan sponsor requires additional supporting medical documentation, it must clearly identify the type of information that must be submitted. If, after the prescribing physician submits an oral supporting statement, the plan sponsor requires the prescribing physician to submit a written supporting statement, the adjudication time frame begins when the plan receives the physician's written supporting statement, even when the plan sponsor requests the physician to submit additional supporting medical documentation and the physician does not submit the requested documentation.

CMS has developed a model notice that Part D plan sponsors can use to request a supporting statement and/or additional information. If a plan sponsor makes any substantive change to a model notice, the proposed change must be approved through the appropriate CMS marketing procedures.

As noted above, the adjudication time frame does not begin until the plan receives the prescribing physician's supporting statement. However, a plan sponsor must not keep the request open indefinitely. If an exception request is submitted without the physician's supporting statement, the plan must contact the enrollee's prescribing physician, or the enrollee and the enrollee's prescribing physician, and request the supporting statement. A plan must provide the prescribing physician with a reasonable opportunity to provide the supporting statement before making its determination. If the plan does not receive the physician's supporting statement within a reasonable period of time, the plan should make its determination based on whatever evidence exists, if any A plan must wait at least 24 hours after the expiration of the time frame that the plan would have had to make a coverage determination if the request did not involve an exception request. In other words, plan sponsors must wait a minimum of 96 hours after receiving a standard request or a minimum of 48 hours after receiving an expedited request before issuing its determination. In the absence of the prescribing physician's supporting statement, the plan may choose to wait longer than the minimum time frames to issue a coverage determination, but it should not leave the request open indefinitely.

The physician's supporting statement must indicate that the requested drug is medically required and other on-formulary drugs and dosage limits will not be effective because:

 
1. 
All covered Part D drugs on any tier of a plan's formulary would not be as effective for the enrollee as the non-formulary drug, and/or would have adverse effects;

 
2.
The number of doses available under a dose restriction for the prescription drug:

 
Has been ineffective in the treatment of the enrollee’s disease or medical condition or,

 
Based on both sound clinical evidence and medical and scientific evidence, the known relevant physical or mental characteristics of the enrollee, and known characteristics of the drug regimen, is likely to be ineffective or adversely affect the drug’s effectiveness or patient compliance; or

 
3.
The prescription drug alternative(s) listed on the formulary or required to be used in accordance with step therapy requirements:

 
Has been ineffective in the treatment of the enrollee’s disease or medical condition or, based on both sound clinical evidence and medical and scientific evidence, the known relevant physical or mental characteristics of the enrollee, and known characteristics of the drug regimen, is likely to be ineffective or adversely affect the drug’s effectiveness or patient compliance; or

 
Has caused or, based on sound clinical evidence and medical and scientific evidence, is likely to cause an adverse reaction or other harm to the enrollee.

A plan must grant a formulary exception when it determines that one of the three factors discussed above has been demonstrated, and the drug would be covered but for the fact that it is an off-formulary drug. This language ensures that drugs that otherwise would not be covered (for example, because they are obtained out of network or excluded under § 1862(a) of the Act), are not covered through the exceptions process.

Unlike under the tiering exceptions process, the regulations do not specify what level of cost sharing applies when an exception is approved under the formulary exceptions process. Instead, plan sponsors have the flexibility to determine what level of cost sharing will apply for non-formulary drugs approved under the exceptions process. For example, a plan sponsor may apply the non-preferred level of cost sharing for all non-formulary drugs approved under the exception process.