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CPAP Certification Program
Module 24: The Economics & Strategy of Formulary Management
Looking behind the curtain: From understanding the rules of the game to mastering the reason they exist.
Beyond the Rejection: Understanding the ‘Why’ Behind the PA
For your entire career, you have been on the front lines of a complex battle. You’ve navigated the cryptic rejections, deciphered the formulary tables, and fought to get your patients the medications their doctors prescribed. You have mastered the ‘what’ and the ‘how’ of prior authorization. This module is designed to illuminate the ‘why’.
Why is a brand-new, cutting-edge drug sometimes preferred over an older, cheaper generic? Why does a payer require a failure of Drug A before Drug B, even when they are in the same class? Why do prior authorization criteria exist at all? The answers to these questions do not lie in clinical data alone; they are found at the intersection of economics, business strategy, and population health management.
To transition from an expert technician to a true PA strategist, you must understand the business models that underpin the entire system. You must learn to think like a Pharmacy & Therapeutics (P&T) Committee member, weighing clinical efficacy against economic impact. This module pulls back the curtain on the opaque world of Pharmacy Benefit Managers (PBMs), manufacturer rebates, and health economic modeling. By mastering these concepts, you will no longer see a prior authorization as an arbitrary roadblock, but as a predictable and logical tool used to execute a larger financial and clinical strategy. This knowledge will empower you to anticipate denials, build smarter appeals, and advocate for your patients with an entirely new level of authority and insight.
Your Guide to the Payer’s Playbook
This module will equip you with a fundamental understanding of the financial and strategic architecture of managed care pharmacy.
Introduction to PBM Business Models
A critical look at how Pharmacy Benefit Managers generate revenue. We will deconstruct the core concepts of manufacturer rebates, administrative fees, and the controversial practice of spread pricing.
The Role of the Pharmacy & Therapeutics (P&T) Committee
Go inside the decision-making body of a health plan. Understand the rigorous process P&T committees use to evaluate clinical trial data, economic models, and real-world evidence to determine a drug’s place on the formulary.
Rebates and Net Cost
An essential deep dive into the paradoxical world of drug pricing. Learn how a high-list-price drug can have a lower “net cost” to the payer due to confidential rebates, and why this is the single most important factor in determining formulary placement.
Health Economics and Outcomes Research (HEOR)
A primer on the sophisticated analytical methods, like ICER and QALY, that payers use to quantify the long-term value of a new drug. Understand how they decide if a new, expensive therapy is “worth it” from a population health perspective.
Connecting PA Criteria to Formulary Strategy
The final, critical connection. This section demonstrates how specific PA criteria (step therapy, quantity limits, clinical restrictions) are not arbitrary but are carefully designed tools to enforce the P&T committee’s decisions and drive utilization to the most cost-effective, preferred agents on the formulary.
