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Formulary management at Green Shield Canada (GSC)

July 8, 2019

Underlying GSC’s SMARTspend™ banner is the philosophy that every investment in health care should produce value – a high-quality outcome relative to its cost. As a pharmacy benefits manager, GSC has always promoted formulary management as an effective way to control drug costs while ensuring plan members are able to access the drugs they need.

GSC offers three types of formulary as the basis for our drug plans. These choices allow you to design a plan that best fits your needs and philosophy, whether that’s providing broad access to new therapies or maximizing cost savings, or both. Of course, any formulary can be subject to limitations and conditions, such as co-pays, deductibles, maximums, and frequencies. And GSC offers a number of sustainability and outcomes-based strategies that can be added to any plan regardless of the formulary chosen.

Open formulary

Most drugs introduced to the marketplace and approved by Health Canada are added to GSC’s open formulary and assigned a coverage status: “covered” or “prior authorization required.” Covered drugs
are full benefits of the plan. A small subset of high-cost and/or specialty drugs with potential for inappropriate prescribing and use are assigned a prior authorization required status meaning approval for the drug is granted only if the plan member meets certain clinical criteria.

Tiered formulary

This is an open formulary that offers an additional layer of cost management oversight through varying levels of reimbursement. Drugs are assigned to a tier based on clinical and cost information; you set the coinsurance level for each tier. (Plans are customized with a maximum of five tiers.) While this design allows for plan member choice, it encourages the use of cost-effective therapies by assigning them to tiers with higher levels of coinsurance. This means costs shift to plan members when they choose less cost-effective drugs.

Managed formulary

To ensure value for dollars spent, before being added to the formulary for reimbursement, all drugs newly approved in the Canadian market are evaluated by our committee of pharmacy experts. Drugs are then assigned to one of three categories: “covered,” “not covered,” or “prior authorization required.”

Covered drugs are full benefits of the plan. A small subset of drugs is assigned a not covered status when the drugs provide no additional value over those already listed in the formulary. Prior authorization required is assigned to drugs for which “step therapy” can be applied and to non-high-cost drugs that offer value only when used for patients with certain clinical characteristics. And, as with the open formulary, a prior authorization required status is also assigned to high-cost and/or specialty drugs with potential for inappropriate prescribing and use. This type of formulary “management” balances the need of plan members to have access to medically necessary drug therapies with plan sustainability.

Introducing the SMARTspend Formulary…

GSC was first carrier to develop a managed formulary – way back in 1996 – which will be called the SMARTspend Formulary as part of the new approach we’ll be offering in the fall. For plan sponsors interested in introducing some level of formulary management into their plans, we’re suggesting a way to gradually transition from an open to a managed formulary. With an emphasis on thoughtful and meaningful formulary management, this approach is designed to provide plan members with access to rational drug treatment while ensuring your plan remains sustainable – the focus being getting the right drug for the right person at the right time.

What sets the SMARTspend Formulary apart is that it offers two levels of formulary management:

  • Lite – This option manages a designated list of high-volume non-specialty drugs, such as for diabetes and asthma, where step therapy, enabled through an automatic-approval process driven by claims history, can be applied. This greatly reduces the need for a form-based prior authorization process and offers a better plan member experience. Management of these high-volume non-specialty drugs (e.g., for diabetes or heartburn) is where there’s greater opportunity for savings.
  • Enhanced – In addition to the drugs managed under the Lite option, this option extends management to a broader list of drugs that is generally cost effective in specific clinical circumstances and for which clinical criteria for access must be satisfied. It has the potential to generate greater savings owing to a more expansive list of drugs under management, including ones for Alzheimer’s disease, pain, and heart disease.

A managed formulary equals value

The bottom line of formulary management is that it allows new drugs that offer genuine therapeutic value to be covered by your plan but doesn’t waste your drug spend on therapies that, while also effective, are considerably more expensive – in other words, new drugs that don’t offer significant clinical improvement over existing ones already proven to be more cost-effective.

The drug pipeline (explored in the summer 2017 issue of Follow the Script) regularly brings new drugs to market, but only a small number represent real breakthroughs. Whether or not a new drug represents an improvement over existing drugs, and therefore offers more therapeutic value, is assessed by the Patented Medicine Prices Review Board (PMPRB).

The PMPRB reviews manufacturers’ pricing of patented medicines sold in Canada and ensures that it’s not excessive. As part of the price review process, each new drug is assigned a recommended level of therapeutic improvement. Over a seven-year period (2010–2017), the PMPRB designated only five per cent of the 750 drugs it reviewed as “substantial improvement” or “breakthrough” drugs while 82 per cent was designated as “slight/no improvement.”

The real spend is in non-specialty drugs

The benefits industry focuses closely on specialty drugs, which only account today for approximately 20 per cent to 30 per cent of total drug spend. And, rightfully so, given that this is a growing market, but what about the other 70 to 80 per cent of non-specialty drug spend? While both open and managed formularies deliver a high degree of oversight and cost-management for specialty drugs, an open formulary doesn’t discriminate as to which non-specialty drugs are eligible for reimbursement under the plan. In other words, an open formulary doesn’t consider whether that drug should be eligible for reimbursement in the first place. A plan design that includes a managed formulary does exactly that – it begins by asking “should this drug be eligible for reimbursement?” When that answer is “yes,” effective cost-management strategies are then applied to control the spend.

Our data shows that only two of the top ten disease states – inflammatory diseases (i.e., rheumatoid arthritis, Crohn’s, psoriasis) and cancer – are largely treated with specialty drugs while most other diseases driving drug spend are treated with non-specialty drugs. And spending for drugs in those therapeutic areas is skyrocketing – in the past fi ve years, diabetes spend, for example, has doubled while asthma spend has increased by a third. And that is what GSC’s SMARTspend Formulary – Lite is all about – critical evaluation and management of drugs in the non-specialty categories that are responsible for driving a significant portion of the spend.

Unlike an open formulary, under the SMARTspend Formulary non-specialty drugs are first assessed to determine whether or not they should be eligible for reimbursement and then how GSC’s cost management strategies can be used to manage the cost while ensuring effective treatment for common conditions.

A better plan member experience

A concern that often arises when consideration is given to the implementation of a managed formulary is how will plan members know what drug alternatives are eligible for reimbursement if the drug prescribed by their physician isn’t eligible under the plan. To alleviate these concerns and help plan members better understand their treatment options, key to the SMARTspend Formulary is the management of drugs within therapeutic categories, such as diabetes and depression. For each category, we provide a list of applicable drugs that shows which ones are covered as full benefits under the formulary as well as those requiring prior authorization and those that are not covered. These comprehensive drug benefit listings make it easier for plan members and their physicians to select eligible alternatives under the plan.

It’s up to you

As with all offerings under the SMARTspend banner, the SMARTspend Formulary is designed to attach value to your health benefits spend. The idea behind value is that every investment in health care – including providing plan members with health benefits – should produce a high-quality outcome relative to its costs. As a plan sponsor, you may be thinking it’s time to re-evaluate your plan. Do you continue to cover benefits that offer limited value, or do you introduce formulary management as a way to ensure the long-term sustainability of your plan? The SMARTspend Formulary – Lite may be the perfect stepping stone to ensure the health care services you’re investing in deliver the value and results you desire. However, if your goal is to maximize cost savings, consider implementing the SMARTspend Formulary – Enhanced.

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