The Power of Formulary – Part 1 of 5: Claims Management and Introduction to the Formulary Method

Dec 02, 2014

This 5 blog series will review drugs claims management and how a drug formulary that integrates with public provincial drug plans may be the best approach to your program sustainability.

There are countless methods to manage or reduce drug claims. Claims management methods can be characterized by the nature of their impact on claims – either short term savings (a reduction that erodes over time due to continued inflation) or long term containment (any design that significantly curbs long term claims inflation).

The traditional approach to cost containment is to transfer claims from the plan sponsor to plan member through the use of annual deductibles and coinsurance. For example, the plan design for the drug component of the extended health benefit may include an annual deductible of $50 for single coverage or $100 for family coverage. A coinsurance example could be 80% instead of 100%, meaning that the plan member would be responsible for 20% of the drug costs. However, keep in mind that placing additional financial burden on plan members can impact an organization’s value proposition, culture and brand.

Implementation of either deductibles or coinsurance does not provide a sustainable plan as it lacks controls on drug expenditures. The increase of expensive drug therapies and inflationary trends can exceed benefit budgets because drug coverage is the one component among the extended health and dental benefits that are not capped or have an annual maximum. Having an annual maximum or cap on drugs is not an appropriate solution either.

A better approach, and arguably the best method to achieve benefit sustainability is to use a drug formulary. A drug formulary is an ever-evolving list of prescription drugs, both generic and brand name, eligible for coverage within a drug program. When either new drugs emerge or if more information on an existing drug becomes available, they are reviewed and evaluated based on their safety, efficacy and costs. The drugs that are deemed to be the most medically beneficial while being reasonably priced are added to the formulary. This ensures that plan members receive quality drug therapies that are comparatively cost-effective to the benefits plan. Of course what drugs are included in the formulary may differ depending on the formulary type chosen, technology capacity of carrier and the province of residence.

Stay tuned for part 2 of this series as we will explore the public provincial approach to drug management through their formulary and deductible systems.

blog rss subscribe button


Jump to:

Place content block here for staff contact info
Place content block here for social media links


Place content block here. Add accent and heading in editor.

Drug Management – Part 2 of 2

By Rob Taylor on December 12, 2013

Drug Management – Part 1 of 2

By Rob Taylor on July 23, 2013

Strategizing about Mental Health

By Rob Taylor on April 5, 2013

Drug Management

By Rob Taylor on September 10, 2012

The Future of You

By Rob Taylor on May 30, 2012


Learn how Rob can help with your group benefits.

Phone 604.714.4410, email or send a message.

Message for Rob