Health Affairs, 22, no. 5 (2003): 84-96 doi: 10.1377/hlthaff.22.5.84 © 2003 by Project HOPE	New Online   Senate Health Reform Bill   Rewarding Providers   Public Option Policy Brief   Health Reform & Abortion   Delivery System Reform

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Drug Costs

Managing Psychotropic Drug Costs: Will Formularies Work?

Payers of pharmaceutical benefits are increasingly turning to drug formularies in an attempt to control rising pharmacy costs, including those for psychotropic drugs. In this paper I examine several issues that policymakers should consider when addressing formulary design for psychotropic drugs: heterogeneity within mental health disorders and limited information about treatment effectiveness for individual patients; the potential for plans to try to use formularies to avoid adverse selection and implications for psychotropic coverage; the interaction of Medicaid formulary policy and manufacturers’ incentives for psychotropic innovation; and incentives created by mental health institutions that decrease formularies’ potential effectiveness in controlling psychotropic drug costs.

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