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drug access 101: what does a formulary have to do with getting your medication paid for?

figuring out drug coverage can be complicated, but knowing the basics can help ensure you get the drug that's right for you at a price you can afford.

by helen stevenson
published oct 18, 2022
read time 5 minute read
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read time 5 minute read
join the conversation
do you know what a formulary is?
pharmaceutical companies determine the manufacturer list price (mlp) for each drug. getty
this is the second part in our series, drug access 101, which takes a look at how medications get to patients, exploring topics such as drug coverage in canada, understanding the types of benefits plans and how to access life-saving treatments affordably within a reasonable amount of time.  anyone who has ever had medication prescribed has no doubt come across the term ‘formulary’ — the list of drugs that are either fully or partially paid for by a drug plan. the medications that are covered can differ based on the type of plan and even where you live. there is also the question of how they are priced and what to do if the drug you need isn’t on the formulary of your plan. figuring out drug coverage and access is complicated, but navigating this complex world is possible. let’s start with some of the basics.

what is a formulary?

within a drug plan, the formulary is the list of drugs that are reimbursed by that plan. drug plans also outline who is covered under the plan, among other things. there are publicly funded and privately funded drug plans. examples of publicly funded drug plans include the ontario drug benefit (odb) plan and the bc pharmacare plan, but there are many others. privately funded drug plans are sponsored by your employer, association or union.

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what does it mean if a drug is on a formulary?

if a drug is on a formulary, it means that the person taking the medication (also referred to as a claimant) is eligible to be reimbursed for the cost of the drug. this does not necessarily mean that the full cost of the drug will be paid — it may be that just a portion will be reimbursed. it’s also important to know that there can be restrictions on whether or not a drug is eligible for reimbursement. for example, some medications may require that certain clinical criteria be met before the drug cost is reimbursed.

drug coverage is different depending on where you live.

coverage can depend on where you live and whether you have a drug plan. in canada, each province and territory have a different drug plan, different groups of people that are covered, and different formularies. similarly, privately funded drug plans — such as the drug plans offered by employers — are each different as well. some will cover certain categories of drugs on their formulary and others may not.

why is my drug not on my province’s formulary?

there can be various reasons that a drug is not listed on a province’s formulary. the most common reason is that lower cost alternatives with similar effectiveness exist, such as when the generic equivalent of a drug comes to market. the higher cost brand name drug may not be kept on a formulary —  for example, only generic celecoxib is covered on the bc pharmacare formulary for the treatment of pain or inflammation, not the brand celebrex. other reasons that a drug may not be listed on a province’s formulary include lack of effectiveness, poor safety, or the cost is too high for the plan to cover.
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how is it decided whether my drug is included?

this varies by drug plan. publicly funded drug plans rely on national organizations such as the canadian agency for drugs and technologies in health (cadth) or quebec’s institut national d’excellence en santé et en services sociaux (inesss) to review the clinical studies conducted with the drug and assess the evidence provided related to criteria such as effectiveness, safety, cost and convenience. other considerations can include the impact the drug may have on patients and society, pricing negotiations, guidance from other advisory bodies, and the sustainability of the drug plan.
cadth makes recommendations for reimbursement that provinces can use to decide whether to include the drug on the formulary or not. in quebec, decisions are based on inesss’ review only. it is important to note that both of these organizations do not review every single medication approved for sale in canada.
privately funded plans may also use cadth or inesss’ recommendations to decide whether or not to add the medication to their formularies, but they are not required to do so.

who decides whether my drug is included in a formulary?

cadth and inesss make recommendations for coverage for publicly funded plans, but the final decision on whether the drug will be included on the formulary is made by each individual province. similarly, insurance companies typically decide which drugs are included on their formularies.
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some formularies are “open” formularies, meaning that every drug is included, no matter how well it works and how much it costs.

what do pharmaceutical companies have to do with drug pricing?

when pharmaceutical companies develop a drug, they must apply to health canada to get the drug approved for sale in canada — this involves a detailed review of all clinical trials and other data related to the drug. once health canada confirms that the drug is safe and effective, it provides a notice of compliance (noc) and pharmaceutical companies must then apply for funding from public and private drug plans.

how are drug prices determined?

pharmaceutical companies determine the manufacturer list price (mlp) for each drug. some public and private plans negotiate a price reduction when deciding whether to include the drug in their formulary.
the pan-canadian pharmaceutical alliance (pcpa) is a negotiating organization for public plans only — that is, for all provinces, territories, and some federal organizations. before a drug is covered by a publicly funded plan, pcpa is almost always involved. it aims to negotiate lower prices for public plans, by way of a confidential discount. private insurance companies are not included in these negotiations, therefore their pricing is typically higher. some private plans negotiate lower prices on their own.
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the range of drug prices in canada is quite large. for example, the most expensive drug is a rare disease gene therapy called zolgensma at $2.91 million per person (it’s a one-dose treatment). kanuma is a lifelong drug therapy that, on average, costs about $892,000 per year.
at the other end of the spectrum, ramipril, a common blood pressure drug, is $0.08 per capsule, while generic tylenol (acetaminophen) is $0.03 per tablet.

what steps can i take if my drug is not on the formulary?

if the drug you are taking is not on the formulary, speak to your doctor or pharmacist to determine if there are other alternatives available on the formulary that are covered. if there are circumstances that make you unable to switch medications, you may be able to apply for exceptional coverage. check your plan’s guidelines or ask your plan administrator for clarification.
 
helen stevenson is ceo of reformulary group.
for the first story in this series, click here.
reformulary group — a toronto-based health technology company that helps canadians navigate drug coverage — does a comprehensive review of drugs with external medical experts from across the country, as well as considering cadth and inesss reviews, comparing of how well each drug works and the cost compared to other drugs to treat a specific medical condition.
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