Adoption of B.C. formulary saves private drug plan $13 million: study

As plan sponsors continue to look for ways to control drug plan spending, a new study from the University of British Columbia shows that switching from an open to a closed formulary can save big dollars.

The study, published this month in the Canadian Medical Association Journal Open, analyzed what happened when the B.C. Hospital Employees’ Union adopted the province’s public formulary in June 2013. Under the change, only drugs listed by the public plan would be covered, though coverage for several popular drugs were indefinitely grandfathered if the drugs were delisted in the formulary.

Plan members were also required to follow the rules for reference pricing and prior authorization of many medicines.

Read: The debate over drug formularies

Using anonymized data from Pacific Blue Cross, the researchers studied the changes in drug plan coverage by examining the 18 months preceding and following the change. Over the study period, the cohort averaged 66,000 plan members and dependants. After the formulary was implemented, the number of prescriptions covered fell by 0.46 per member per month, resulting in a decline of 23.8 per cent after a year.

Plan spending dropped by $13.2 million over the 18 months after the coverage change.

The study’s authors, Michael Law, an associate professor at UBC’s faculty of medicine’s centre for health services and policy research, and Alan Cassels, a drug policy researcher affiliated with the University of Victoria, were surprised at the level of savings accrued. “We wanted data to prove the benefit of having a formulary but we didn’t expect so much in savings,” says Cassels. “It’s mind-blowing.”

The study is important because there’s been little research done to analyze the impact of changing to a formulary, says Law. “The issue is almost never studied because of lack of data. But we worked with the union and they gave us the data.”

The researchers hope the new evidence will prompt discussion about making sure a drug is worth the money before covering it under the drug plan. “You often hear that provincial formularies don’t cover new drugs,” says Law. “But that’s not true. Oftentimes, PharmaCare will cover a new drug if it is considered worth paying for because it has proven benefits.”

Read: PEI adds six drugs to formulary at cost of $750,000 a year

Switching a drug plan from open access to a formulary has pros and cons, says Sharon Dent, partner and senior benefits consultant at Dent Benefits Consulting in Vancouver. “When you change to a provincial formulary like B.C.’s Fair Pharmacare, you leave it to the government to decide what to cover. Ninety-nine per cent of the time, specialty medications aren’t covered and that can be upsetting for individuals who need specialty drugs to live and be productive. On the financial side, yes, you can save money on the B.C. formulary, but there is more at stake than money. If plan members aren’t educated about the switch to a formulary, the change won’t be worth it.”

Suzi Beckett, chief operating officer and health and benefits consultant at Northern Star Benefit Consultants Ltd. in Surrey, B.C., agrees that education is key to effectively introducing the merits of drug formularies to plan sponsors and employees alike.

“Insurers have taken great strides in bringing consumer-based technology to the group benefits arena, including cost and generic substitution availability of a given drug,” she says. “Expanding this capability to provide plan sponsors with quantitative and qualitative data comparing the impact of various formularies would increase the essential ingredient to change — awareness, evidence and understanding.”

Read: Plan sponsors using generic substitution, co-payments to curb drug plan costs: report