Drug formulary management is a cornerstone of managed care pharmacy practice. It is the systematic process by which health plans and PBMs evaluate medications to promote safe, effective, and affordable drug therapy for a population. For PharmD students, understanding how formularies are designed, how drugs are reviewed, and how utilization management tools are applied is critical for navigating the healthcare landscape and understanding patient access to medications.
1. A drug formulary is best defined as:
- A list of all pharmacies in a health plan’s network
- A continually updated list of medications covered by an insurance plan
- A textbook of pharmacology
- A patient’s personal medication list
Answer: A continually updated list of medications covered by an insurance plan
2. The committee primarily responsible for developing, managing, and evaluating the formulary in a managed care organization is the:
- Medical Executive Committee
- Pharmacy and Therapeutics (P&T) Committee
- Quality Improvement Committee
- Member Services Committee
Answer: Pharmacy and Therapeutics (P&T) Committee
3. In a tiered formulary, which tier typically has the highest patient cost-sharing?
- Tier 1 (Preferred Generics)
- Tier 2 (Preferred Brands)
- Tier 3 (Non-Preferred Brands)
- Tier 4/Specialty Tier
Answer: Tier 4/Specialty Tier
4. What is the primary purpose of requiring a Prior Authorization (PA) for a medication?
- To ensure the drug is medically necessary and used according to clinical guidelines
- To increase the administrative workload for physicians
- To make sure the patient can afford the copayment
- To encourage the use of the most expensive medications
Answer: To ensure the drug is medically necessary and used according to clinical guidelines
5. The utilization management strategy that requires a patient to try a preferred, cost-effective drug before a more expensive alternative is covered is known as:
- Quantity Limit
- Step Therapy
- A retrospective DUR
- Coinsurance
Answer: Step Therapy
6. A “closed formulary” is a type of drug formulary design where:
- All FDA-approved drugs are covered
- Only drugs listed on the formulary are covered by the health plan
- No generic drugs are included
- Patients have no copayments
Answer: Only drugs listed on the formulary are covered by the health plan
7. When a P&T committee reviews a new drug, a critical component of the evaluation is the drug’s:
- Marketing budget
- Packaging design
- Clinical efficacy and safety compared to existing alternatives
- Manufacturer’s stock price
Answer: Clinical efficacy and safety compared to existing alternatives
8. The use of cost-effectiveness analysis in formulary decisions is a principle of what field?
- Pathophysiology
- Medicinal Chemistry
- Pharmacoeconomics
- Sterile Compounding
Answer: Pharmacoeconomics
9. A drug monograph prepared for a P&T committee typically includes all the following information EXCEPT:
- A summary of the drug’s pharmacology and mechanism of action
- A review of pivotal clinical trials for safety and efficacy
- The names of the pharmaceutical sales representatives for the drug
- An analysis of the drug’s potential financial impact
Answer: The names of the pharmaceutical sales representatives for the drug
10. What is a primary driver for a manufacturer to offer a rebate for their drug?
- To secure a preferred position on a health plan’s formulary
- To increase the wholesale acquisition cost (WAC)
- To fund direct-to-consumer advertising
- To pay for the cost of clinical trials
Answer: To secure a preferred position on a health plan’s formulary
11. A quantity limit (QL) on a triptan for migraines (e.g., 9 tablets per month) is a formulary management strategy designed to:
- Ensure patients use the medication for acute treatment rather than daily prevention
- Encourage overuse of the medication
- Increase the risk of medication side effects
- Make the medication more expensive for the health plan
Answer: Ensure patients use the medication for acute treatment rather than daily prevention
12. An “open formulary” design typically means that:
- No drugs are covered by the health plan
- A health plan covers most drugs, but may use higher cost-sharing for non-preferred drugs
- Only generic drugs are covered
- The formulary is open for public comment
Answer: A health plan covers most drugs, but may use higher cost-sharing for non-preferred drugs
13. A formulary exclusion list, such as the one published by ESI, details which drugs?
- Drugs that are preferred and have the lowest copay
- Drugs that are newly approved by the FDA
- Drugs that are not covered by the health plan, often because effective, cheaper alternatives are available
- Drugs that are only available over-the-counter
Answer: Drugs that are not covered by the health plan, often because effective, cheaper alternatives are available
14. A key role of a managed care pharmacist is to:
- Personally call every patient in the health plan each day
- Use evidence-based medicine to support formulary management decisions
- Dispense prescriptions in a community pharmacy setting
- Compound sterile preparations for hospitals
Answer: Use evidence-based medicine to support formulary management decisions
15. Medicare Part D regulations require that plan formularies include at least how many drugs per therapeutic category?
- One
- Two
- Five
- All of them
Answer: Two
16. A cost-utility analysis, which uses Quality-Adjusted Life Years (QALYs), is a tool that can be used to inform:
- The chemical structure of a new drug
- Formulary decisions about a drug’s value
- The proper method for sterile compounding
- The daily staffing schedule of a pharmacy
Answer: Formulary decisions about a drug’s value
17. What is a formulary exception or appeals process?
- A way for a patient to request a higher copayment
- A process for a prescriber to request coverage for a non-formulary drug based on medical necessity
- A method for removing a drug from the formulary
- A lawsuit against the health plan
Answer: A process for a prescriber to request coverage for a non-formulary drug based on medical necessity
18. Specialty tiers in a formulary are a design strategy to manage:
- The costs of low-cost generic medications
- The high costs of specialty pharmaceuticals
- Over-the-counter products
- Drugs that are soon to lose their patent
Answer: The high costs of specialty pharmaceuticals
19. When a generic equivalent for a brand-name drug becomes available, the most common formulary management strategy is to:
- Move the brand-name drug to a lower tier with a lower copay
- Move the brand-name drug to a higher (non-preferred) tier or require step therapy through the generic
- Remove the new generic drug from the formulary
- Make both the brand and generic have the same high copayment
Answer: Move the brand-name drug to a higher (non-preferred) tier or require step therapy through the generic
20. The primary goal of formulary management is to:
- Maximize pharmaceutical company profits
- Deny access to all necessary medications
- Balance clinical evidence, safety, and cost to provide value to members
- Only cover the most expensive drugs available
Answer: Balance clinical evidence, safety, and cost to provide value to members
21. A P&T Committee’s voting members are typically composed of:
- Mostly pharmacists and physicians from various specialties
- Only marketing professionals and sales representatives
- Only hospital administrators and lawyers
- Only patients and members of the public
Answer: Mostly pharmacists and physicians from various specialties
22. A therapeutic interchange program allows a pharmacist to automatically substitute:
- A brand drug for a generic drug
- A preferred drug for a non-preferred drug within the same therapeutic class, based on a pre-approved protocol
- One dosage form for another without physician approval
- A drug from a different therapeutic class
Answer: A preferred drug for a non-preferred drug within the same therapeutic class, based on a pre-approved protocol
23. Formularies are a key component of which type of healthcare system?
- Fee-for-service indemnity insurance
- Managed care
- Direct primary care
- Health savings accounts
Answer: Managed care
24. The concept of “drug tiering” directly impacts:
- The drug’s mechanism of action
- The patient’s out-of-pocket cost-share
- The drug’s chemical stability
- The drug’s route of administration
Answer: The patient’s out-of-pocket cost-share
25. A pharmacist working for a health plan might review claims data to identify adherence gaps as part of what kind of formulary-related program?
- A clinical quality program
- A drug recall program
- A marketing program
- A drug wholesaling program
Answer: A clinical quality program
26. Why would a plan choose to have an “open” formulary instead of a “closed” one?
- To severely restrict member access to medications
- To provide broader drug access and choice, while still using cost-sharing to guide members
- To eliminate the P&T committee
- Because it is less expensive to manage
Answer: To provide broader drug access and choice, while still using cost-sharing to guide members
27. A cost-minimization analysis is a pharmacoeconomic tool used in formulary decisions when two or more drugs:
- Have very different clinical outcomes
- Are demonstrated to have equivalent outcomes, allowing the decision to be based on cost alone
- Are in different therapeutic classes
- Have not yet been approved by the FDA
Answer: Are demonstrated to have equivalent outcomes, allowing the decision to be based on cost alone
28. Prior authorization programs for drugs like PCSK9 inhibitors are a formulary management strategy to ensure they are used in:
- All patients with high cholesterol
- The specific patient populations that match the clinical trial evidence and guidelines
- Patients who have failed generic statin therapy only
- Patients who have not yet tried lifestyle modification
Answer: The specific patient populations that match the clinical trial evidence and guidelines
29. The main reason a health plan creates a formulary is to:
- Increase the number of prescriptions dispensed
- Manage the pharmacy benefit for a population
- Make healthcare more confusing for patients
- Help pharmaceutical manufacturers maximize profits
Answer: Manage the pharmacy benefit for a population
30. Which of these is LEAST likely to be a factor in a P&T committee’s decision?
- The results of randomized controlled trials
- The drug’s side effect profile
- The manufacturer’s direct-to-consumer advertising campaign budget
- The cost-effectiveness of the drug
Answer: The manufacturer’s direct-to-consumer advertising campaign budget
31. The process of comprehensively reviewing all drugs in a therapeutic class for a formulary is called a:
- Drug monograph review
- Drug class review
- Step therapy review
- Post-market surveillance review
Answer: Drug class review
32. In a health plan, formulary management is intrinsically linked with:
- Contracting and rebate negotiations with manufacturers
- The pharmacy’s daily workflow
- The physical design of the pharmacy
- The compounding of sterile preparations
Answer: Contracting and rebate negotiations with manufacturers
33. What does it mean if a drug is “non-formulary”?
- It is the most preferred drug and has a $0 copay
- It is not on the health plan’s list of covered drugs and will likely not be covered
- It is a new drug that has just been approved
- It can only be dispensed by a mail-order pharmacy
Answer: It is not on the health plan’s list of covered drugs and will likely not be covered
34. The primary audience for a formulary drug monograph is the:
- General public
- Group of pharmacists and physicians on the P&T committee
- FDA review panel
- Pharmaceutical sales team
Answer: Group of pharmacists and physicians on the P&T committee
35. A key skill for a pharmacist involved in formulary management is:
- The ability to compound non-sterile liquids
- Strong customer service skills
- Critical literature evaluation
- The ability to administer vaccinations
Answer: Critical literature evaluation
36. A formulary management strategy might designate certain pharmacies as “specialty pharmacies” based on their ability to:
- Handle complex high-cost drugs that require special storage and patient monitoring
- Compound sterile products
- Offer the lowest prices on generic drugs
- Provide 24-hour service
Answer: Handle complex high-cost drugs that require special storage and patient monitoring
37. The “grandfathering” of a patient on a non-formulary drug means:
- The patient is immediately forced to switch to a formulary alternative
- The health plan allows the patient to continue on their current therapy after it has been removed from the formulary
- The patient must pay the full cash price for the drug
- The patient’s grandfather must also be taking the same medication
Answer: The health plan allows the patient to continue on their current therapy after it has been removed from the formulary
38. The ultimate goal of a P&T committee is to create a formulary that:
- Includes only the most expensive drugs
- Is identical to the formularies of all competing health plans
- Promotes rational, evidence-based, and cost-effective pharmacotherapy
- Changes on a daily basis
Answer: Promotes rational, evidence-based, and cost-effective pharmacotherapy
39. A decision to place a drug on Tier 3 (non-preferred brand) instead of Tier 2 (preferred brand) is often influenced by:
- The drug having superior clinical efficacy
- The lack of a generic alternative
- The manufacturer offering a smaller rebate compared to drugs in Tier 2
- The drug being easier to pronounce
Answer: The manufacturer offering a smaller rebate compared to drugs in Tier 2
40. Formulary management decisions have a direct impact on:
- The pharmacy’s daily staffing hours
- Patient access to medications and out-of-pocket costs
- The color of the prescription label
- The speed of the pharmacy’s internet connection
Answer: Patient access to medications and out-of-pocket costs
41. The role of a pharmacist on a P&T committee often involves:
- Preparing and presenting the clinical and economic evidence for drugs under review
- Voting based on personal prescribing preference
- Ensuring all new drugs are added to the formulary regardless of evidence
- Managing the committee’s meeting schedule
Answer: Preparing and presenting the clinical and economic evidence for drugs under review
42. Which statement best describes the dynamic nature of a drug formulary?
- Once created, a formulary never changes
- A formulary is reviewed and updated periodically to account for new drugs, evidence, and guidelines
- Only drugs that have been on the market for over 20 years are on the formulary
- The formulary is randomly generated by a computer each year
Answer: A formulary is reviewed and updated periodically to account for new drugs, evidence, and guidelines
43. A pharmacist in a community setting interacts with formulary management daily when they:
- Receive a “prior authorization required” rejection from the PBM
- Compound a non-sterile preparation
- Counsel a patient on a new medical device
- Administer a vaccine
Answer: Receive a “prior authorization required” rejection from the PBM
44. What is a primary objective of formulary design for a Medicare Part D plan?
- To meet CMS guidelines, including coverage of all or substantially all drugs in protected classes
- To exclude all drugs used by the geriatric population
- To have the highest possible copayments for all medications
- To operate without a P&T committee
Answer: To meet CMS guidelines, including coverage of all or substantially all drugs in protected classes
45. If two drugs have similar efficacy and safety, but one has a significantly lower net cost after rebates, formulary management principles would favor:
- Placing both drugs on the preferred tier
- Placing the lower-cost drug in a preferred formulary position
- Excluding both drugs from the formulary
- Requiring prior authorization for the lower-cost drug
Answer: Placing the lower-cost drug in a preferred formulary position
46. A drug’s formulary status can directly influence:
- Its mechanism of action
- Its molecular weight
- The manufacturer’s sales and market share
- Its chemical stability
Answer: The manufacturer’s sales and market share
47. A “formulary system” is broader than just the list of drugs; it includes the policies and procedures for:
- Selecting, using, and monitoring drugs, including the work of the P&T committee
- Storing drugs in the pharmacy
- Hiring pharmacy technicians
- Designing the layout of the pharmacy
Answer: Selecting, using, and monitoring drugs, including the work of the P&T committee
48. Step therapy is often implemented for which class of drugs?
- Drugs where multiple agents have similar efficacy but different costs, like statins or proton pump inhibitors
- Drugs for rare, orphan diseases
- All over-the-counter medications
- All newly approved medications
Answer: Drugs where multiple agents have similar efficacy but different costs, like statins or proton pump inhibitors
49. For a PharmD student, learning about formulary management is essential for a career in:
- Managed care organizations or PBMs
- The pharmaceutical industry
- Hospital pharmacy administration
- All of the above
Answer: All of the above
50. The core principle guiding all formulary management decisions should be:
- Maximizing PBM profits
- The promotion of evidence-based and cost-effective patient care
- The personal preferences of the P&T committee members
- The marketing efforts of pharmaceutical companies
Answer: The promotion of evidence-based and cost-effective patient care
I am a Registered Pharmacist under the Pharmacy Act, 1948, and the founder of PharmacyFreak.com. I hold a Bachelor of Pharmacy degree from Rungta College of Pharmaceutical Science and Research. With a strong academic foundation and practical knowledge, I am committed to providing accurate, easy-to-understand content to support pharmacy students and professionals. My aim is to make complex pharmaceutical concepts accessible and useful for real-world application.
Mail- Sachin@pharmacyfreak.com