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Am J Manag Care. 2002 Dec;8(12):1041-54.

How effectively do managed care organizations influence prescribing and dispensing decisions?

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  • 1School of Pharmacy, Virginia Commonwealth University, Richmond, VA 23298, USA.



To examine the extent to which managed care organizations (MCOs) use formularies, therapeutic interchange, and prior approval and to determine how effectively these tools influence prescribing and dispensing decisions.


Literature review.


Studies relating to effectiveness were identified through a comprehensive literature review using the MEDLINE and International Pharmaceutical Abstracts databases. Only peer-reviewed studies done in outpatient settings were included. Studies measuring extent of use were taken primarily from published and widely available marketing research reports.


Closed formularies were found to be effective in decreasing the utilization, but not necessarily the cost, of prescription drugs. Just under half of health maintenance organizations (HMOs) and 10% of employer-sponsored health plans use closed formularies. Prior approval programs have been shown to reduce use of target drugs and drug costs in a small number of drug classes. Nearly all HMOs and most employer-sponsored health plans use prior approval programs. How extensively the programs are used is not reported. About half of HMOs and employer-sponsored health plans use therapeutic interchange. Voluntary programs have been shown to be successful in staff-model HMOs. Mandatory, but not voluntary, programs have been shown to be successful in independent practice association-model HMOs.


The literature indicates that most MCOs have had limited success using formularies, therapeutic interchange, and prior approval to influence prescribing and dispensing decisions. Although these tools have been effective in some situations, their impact has been limited by their low rate of utilization.

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