Formularies have been developed in response to specific forces which have affected pharmaceutical utilization and costs. Specifically, this is in response to an increase in the aging population requiring more drugs, inflation in the acquisition cost of drugs, increasing utilization, and the introduction of new technology. Well-researched formularies will provide the drug therapy needs for 85-90% of the population. Patients unresponsive to listed formulary drugs may use nonformulary drugs if appropriate methods of authorization are instigated. Various types of formulary management exist: open, where they can be used as a guideline, and drug benefits are not limited to the formulary; restricted or closed, where only drugs on the formulary or those previously authorized will be paid for; incentive based, where patients pay a higher price for nonformulary drugs, and patient driven, where the patient holds a list of drugs they can be supplied with. Effective formulary performance requires the joint co-operation of the pharmacists, payers, physicians, the pharmaceutical industry, and patients. These clinically based formularies then form an important measure to control costs while providing quality care. This paper will discuss the advantages of a formulary, its development, administration, and management.