business process solutions... Learn More Accelerating client's success using Health IT and ePrior Authorization’s
Real Benefits:
Reducing Frictional Costs and
Speeding Time to Therapy
A comprehensive 107 page report
on present-day ePA and the future
Learn More
Learn More
Creating value in today's
Learn More
healthcare ecosystem...

HIT Perspectives: Innovations in Formulary, Benefit and Eligibility to Transform the Point of Care Experience

HIT Perspectives – June 2020

Innovations in Formulary, Benefit and Eligibility to Transform the Point of Care Experience

Mike Burger

By Michael Burger, Practice Lead, EHRs and EDI

Quick Summary

  • New approaches to maintaining eligibility, formulary and benefit information are needed.
  • Enabling providers to validate formulary compliance at the point of care and ePrescribe has improved patient safety/satisfaction, care quality and reduced healthcare costs.
  • The time is right for more complete and accurate formulary data.

When thinking about innovation in healthcare technology, AI, Blockchain and FHIR® come to mind. We don’t generally think about ePrescribing transactions such as eligibility or formulary and benefit. Yet, new approaches to maintaining eligibility, formulary and benefit information to better support these transactions could and should be happening and are critical to getting and keeping a patient on the right drug.

This innovation is leading to increased patient and prescriber satisfaction; improved pharmacy efficiency; cost-savings for PBMs, health plans and patients and improved safety and outcomes for patients. With the right focus and continued attention, the value proposition of ePrescribing transactions will continue to improve over time.

How we got where we are. Arguably, the inception of the electronic health record (EHR) age was the introduction of electronic prescribing (ePrescribing) with integrated formulary and benefit information. Using a computer to write prescriptions, validate formulary compliance and send them to the pharmacy in practices where the clinical workflow was not otherwise computerized paved the way for the introduction of the full EHR that we know today.

In those heady days in the early 2000’s, now-defunct companies like ePhysician and iScribe and some that are still around today, like Allscripts and DrFirst, marketed and distributed ePrescribing technology to physicians that needed to be convinced of the value.

The value was (and still is) compelling. Enabling providers to validate formulary compliance at the point of care and ePrescribe has dramatically impacted patient care in several ways:

  • Patient Safety
    • Eliminating pharmacy transposition errors
    • Reducing adverse drug events (ADE) by validating drug interactions at the point of care
  • Patient Satisfaction
    • Having the prescription ready at the pharmacy
    • Reducing delays at the pharmacy counter due to formulary coverage restrictions and prior authorization
    • Avoiding unexpected costs and out-of-pocket expenses at the pharmacy
  • Care Quality
    • Increasing medication adherence because ePrescribed and formulary compliant prescriptions are picked up more often than paper prescriptions
  • Cost Savings
    • Reducing care related to ADE’s
    • Surfacing availability of mail order benefits
    • Driving formulary-preferred product selection using point-of-care formulary information

A review of the literature drives home those value propositions over time. A 2005 study showed a 17.5 percent decrease in ePrescriptions for high-cost drugs, in favor of lower cost brand or generic alternatives. Another study revealed that between 2008 and 2010, there was a 10 percent increase in the number of prescriptions picked up at the pharmacy when ePrescribed compared to written prescriptions. Yet another study documented the value of providers taking less time resolving issues with formulary switches and prior authorization.

These factors, plus federal programs such as the Medicare Modernization Act (MMA) and the Medicare Improvements for Patients and Providers Act (MIPPA), caused adoption of ePrescribing to dramatically increase. Some 80% of all retail and mail service prescriptions were ePrescribed in 2019, according to Surescripts.

As with any new technology, ePrescribing and point-of-care formulary validation began with a few handicaps. Many amounted to growing pains and have smoothed out as the process has matured. A few, though, have hampered satisfaction with the ePrescribing experience even as adoption has grown. One such area is the quality of the eligibility, formulary and benefit data available to the prescriber at the point of care. This is where innovation is happening.

How eligibility, formulary and benefits work. The above-mentioned study from 2005 talks about a reduction in prescriptions for high-cost drugs using ePrescribing. This was accomplished by tools embedded within EHR prescribing workflow capable of accurately matching the patient to the correct pharmacy benefits provider and their associated formulary. This enables display of formulary data in the EHR at the point-of-care, so the prescriber can see what is covered by the patient’s formulary. A recent article by CoverMyMeds describes drug formularies and the role they have played in helping to lower insurer and patient out-of-pocket costs.

In addition to giving providers access to information about patients’ benefit coverage, formulary and benefit also gives a provider insight into whether there are less expensive alternatives. In cases where the prescriber considers the alternative appropriate, it is simple to switch the order in the EHR. When the downstream repercussions of the more expensive choice are considered – a phone call from the pharmacist asking for a formulary switch or the patient not picking up the drug because it’s too expensive – it’s easy to see why this feature of ePrescribing is beneficial. According to an analysis conducted by BenMedica, all mid- to large-sized PBMs have the capability to provide drug alternative information to providers within their EHRs. The benefits are obvious, yet the presentation of formulary and benefit information is not without challenges.

Two other facets of the ePrescribing process are supported by formulary and benefit information – drug price transparency and electronic prior authorization (ePA). As conveyed by the American Medical Association in its “Prior Authorization and Utilization Management Reform Principles”:

 Principle #9: Utilization review entities should provide — and vendors should display — accurate, patient-specific, and up-to-date formularies that include prior authorization and step therapy requirements in electronic health record (EHR) systems for purposes that include e-prescribing.  

The Prior Authorization indicator in the Formulary and Benefit information is the basis by which the ePA process is initiated. While the ePA process itself is a more recent innovation, its’ effectiveness is predicated upon the formulary and benefit information. Our CEO, Tony Schueth wrote about the importance of formulary and benefit supporting the evolving real-time benefit check (RTBC) back in 2018.

Our report, “Real-Time Pharmacy Benefit Check: The Payer Value Proposition” posits that one of the foundational values of real-time benefit check for payers is to help improve core ePrescribing performance indicators including increased formulary and compliance, and reducing the administrative costs of prior authorization. Traditional formulary and benefit information is not replaced by RTPBC, rather it provides the basis for RTPBC processes. This interplay between formulary, benefit and RTPBC can apply across both pharmacy and medical benefits, can provide improved transparency, support for specialty medications and ideally positively impact on adherence.

Formulary and Benefit challenges. As exciting as RTPBC is, formulary and benefit is a foundational element to many of the current day ePrescribing transactions and has been adopted by nearly every physician in the country. It shouldn’t be taken lightly. Despite the maturity of the formulary and benefit transactions and their wide adoption over the years, three formulary-related challenges have emerged.

First is the challenge of identifying the patient’s pharmacy benefits manager, enabling the link to their associated formulary. A patient’s coverage changes fluidly, and the structure of formulary coverage with carve-outs and tiers is complex. Ensuring that the coverage information that is displayed in the EHR is the correct plan information for the patient requires complex technologies that have evolved over the years. Formulary identification is accomplished using an eligibility transaction, comprehensive master patient indexes and sophisticated matching technology. The eligibility data is maintained by each PBM. Variation in the completeness of the data, accuracy of the linkages to formulary and frequency of update add to the inconsistency of the eligibility process.

Second is the display of the data. Formulary and Benefit information is complex. EHR software developers realized that for the formulary data to be useful at the point of care, it needed to be easy to understand at a glance, and quick to display. To address the complexity and their customers’ need for understandable-at-a-glance information, EHRs simplify formulary display by using smiley face icons, red, yellow and green indicators, plus/minus or dollar signs, or least-to-most-expensive ranked lists. In some cases, EHRs decided not to display some information at all. While making the information easier to read, these displays over-simplify or even omit some clinically relevant insights. Worse, they can be misleading or just plain wrong.

The third challenge is the quantity and quality of the data. Each PBM manages hundreds or even thousands of different formularies. And each PBM uses its own process to manage the data and updates it on its own timetables. Even though there is a data standard for transferring formulary data to health information networks such as Surescripts, many of the fields within the standard are not required and can be interpreted differently, depending on a PBM’s benefit strategies or implementation of the standard. The result is that the formulary data displayed in the EHR is inconsistent. For example, if there is a chance a drug could require a prior authorization, some PBMs elect to flag for prior authorization within formulary, other PBMs elect not to and trust the requirement will be noticed downstream at a dispensing pharmacy. As another example, there are varying interpretations of how to reflect a drug’s formulary status with the standard’s 0-99 ranking system. As a result of these two examples, the formulary data displayed in the EHR can be inconsistent from patient to patient, and from PBM to PBM.

The trust factor. The data quantity/quality issue has had a detrimental effect on trust in the data. When a prescriber writes a prescription, and the formulary information in the EHR indicates that there are no restrictions for a medication for their patient, is it because there really aren’t any restrictions? Or is it because that payer has not provided the full formulary information? Or, if the patient arrives at the pharmacy counter, does the pharmacist tell the patient they have to contact the doctor because the prescribed drug is not on-formulary? After a few of these snafus and second guesses, prescribers begin not to trust the formulary data. Evidence of this lack of trust is outlined in an early 2019 CoverMyMeds study which showed that “on average, providers scored trust in formulary and benefit  data a problematic 5.7 out of 10, indicating they often don’t rely on the information to make decisions or inform patients.” Anecdotally, in working with practices, some providers have turned off formulary validation in their EHRs. Some neglect (either intentionally or unintentionally) to update the formulary files in their EHR.

The time is right for improving data quality. Given the benefits borne of point-of-care formulary validation to all participants – patients, providers, PBMs, pharmacies – more complete and accurate data will certainly yield added value to a mature process like ePrescribing. Investments in improving the quality and quantity of formulary data available in EHRs will yield significant returns.

There are a number of interrelated moving parts to the formulary validation process, including eligibility and the formulary files themselves. Each part represents an opportunity.

Focus on the eligibility verification process and beefed-up quality assurance on eligibility responses will provide a higher rate of eligibility matches. This improvement is key, because the EHR formulary process is predicated upon a successful eligibility transaction, which matches the patient to the correct formulary.

Another area of focus must be on the quality of formulary data itself. Addressing inconsistencies across PBM’s multiple formulary files and closing data gaps will increase the completeness of the data. More complete information will engender providers trust of the data.

The value of completeness of the data can’t be stressed enough – it infiltrates every segment of the delivery of healthcare. A great example is a single field of data in the formulary file – the Prior Authorization indicator. This one-byte field influences every stakeholder. When aware of a prior authorization requirement for a medication at the point of care:

  • The prescriber can ensure that the patient meets all of the requirements and use the electronic prior authorization feature of the EHR to submit the information to the payer.
  • The PBM ensures that the patient meets all of the requirements, receives necessary information electronically for approval, and can quickly authorize the prescription.
  • The pharmacy receives a clean, already authorized prescription and can dispense without delay
  • The EHR’s customers use the electronic prior authorization feature which was added to the ePrescribing function of the EHR.
  • The patient avoids being in prior authorization inertia, while the pharmacy, doctor and PBM inefficiently gather the information needed for approval.

Improving completeness of this single field of data has wide implications across every stakeholder – it’s a quintuple win. Patient outcomes improve when the patient gets on therapy without delay. Patient satisfaction improves because they pay the lowest co-payment. EHR vendors benefit by having clients use the ePA feature they built and are satisfied that the software is working as it should. Pharmacies benefit from receiving clean prescriptions to dispense and not having to make clarifying calls to the prescribers. PBMs benefit by reimbursing for an efficacious and cost-effective therapy. Prescribers benefit by not having to field those clarifying phone calls from the pharmacy.

Even small percentage changes, across billions of transactions, will be hugely impactful. For example, a slight percentage increase in the number of prescriptions for formulary-preferred medications, switched from prescriptions that are on-formulary but not preferred translates into millions of dollars of cost savings. These savings accrue not only to the PBMs, providers and pharmacies, but also to patients in the form of lower co-payments and ultimately, lower insurance premiums.

With a strong focus on the quantity and quality of the eligibility, formulary and benefit data made available in the EHR, there is more value that can be squeezed from point-of-care formulary validation and ePrescribing. Initially, the value of ePrescribing was achieved by moving from a paper to an electronic process. Now that virtually all prescriptions are electronically written, the pendulum has swung towards expanding the value proposition for continued investment. Examples of continued investment include: optimizing patient matching capabilities, refreshing underlying data transfer technologies, more clearly communicating multiple coverage scenarios and aligning on a common interpretation of the formulary technology standard.

Continued investment is necessary on the part of each stakeholder to keep up the momentum of change. PBMs should continue to dedicate time and resources to improve the quality, accuracy and completeness of formulary & benefit and eligibility data. EHRs should evaluate and improve their display of formulary data to be more concise and meaningful. As the quality and completeness of the data continues to improve, we can achieve the quintuple win, with benefits for every stakeholder.

If you need help implementing these emerging innovations in formulary, benefit and eligibility or simply want to better understand the landscape, contact me at 


In this Issue:

  1. Innovations in Formulary, Benefit and Eligibility To Transform the Point of Care Experience
  2. Four Factors Driving the Momentum of Telehealth Adoption That Will Continue After the COVID-19 Crisis
  3. Post COVID-19: Five Things That Will Come Roaring Back With a Twist