Agency theory, drug formularies, and drug product selection: Implications for public policy

The authors describe the pharmaceutical utilization system and present the conceptual framework for agency theory. They then apply agency theory to th e selection of pharmaceuticals and the role of drug formularies in drug sel ection. The use of drug formularies can increase the goal conflict and unce rtainty related to the selection of drug products. The authors address publ ic policy and research directions to suggest ways of reducing the level of goal conflict and uncertainty associated with drug selection. Recognition o f agency relationships and the environment surrounding agency relationships appear to be important for the development and analysis of future policy r egarding selection decisions pertaining to pharmaceuticals.