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The Reformulary: Our favourite new plan design

My name is Yafa, and I have a drug problem.

Our block at The Beneplan Employee Benefits Co-operative was hit hard in 2015 by several biologic drug claims. While drug companies are falling over themselves to acquire the rights of biologic drugs, plan sponsors and advisors are scrambling to react to this new normal.

Insurers are hiking pooling costs, and I don’t blame them. Don’t kid yourself: if you were about to write your name underneath a policy, I’d wager that you too would increase premiums. Advisors are pleading with insurers for mercy. Some of the leaders in our field are even lobbying the government to try and pick up more of these costs, and I’m thankful for them.

In the meantime, what can advisors do when faced with a tough renewal? Throwing the plan out to market will not solve this issue.

With that, I feel it necessary to share one of the best tools we used in 2015 to prepare for 2016 renewals: The Reformulary.

The Reformulary: A Multi-Tiered Drug Formulary

Before you raise your eyebrows, I should declare that we are not compensated by Reformulary Group, nor do we earn more commissions by recommending it. In fact, we earn less because it decreases premiums. Regardless, I would not hesitate to recommend it to every single one of our plan sponsors.

A ‘formulary’ is a list of drugs showing what is covered under the benefit plan. Reformulary Group’s multi-tiered formulary uses clinical evidence to place drugs into two categories: preferred and non-preferred.

Their independent, unbiased panel of doctors and pharmacists sift through the thousands of drugs covered by a plan, and then declare them to be ‘preferred’ if they are clinically effective, safe, and pose the most plan value. Drugs are deemed ‘non-preferred’ if they are either found to be less effective, poorly tolerated, or equally effective as preferred drugs but much more expensive.

More than Generic Substitution

There is an initial fear that Reformulary simply takes away coverage for all brand name drugs, or simply tries to emulate mandatory generic drug plans. Those assumptions couldn’t be farther from the truth.

The reality is that 85% of all DINs (drug identification numbers, the unique ID for each medication) are listed as ‘preferred’ and therefore have Tier 1 coverage. This means that if your plan currently has 100% coverage for drugs, these DINs stay at 100%.

Further, 5% of DINs are listed on Tier 2 at a 30% difference from Tier 1 (e.x. 70% coverage), and 10% are listed on Tier 3 for the lowest level of reimbursement (e.x. 40% coverage).

Drugs are listed on Tier 2 and 3 only if there are therapeutic alternatives on Tier 1 which are either safer, clinically equivalent at a lower cost, or clinically superior.

We have seen medications on Tier 1 which are brands, and their equivalent generics on Tier 3, because either the generic is more expensive than the brand, or it is truly less effective, based on the evidence.

Reformulary is able to outsmart some of the games that drug companies play to circumvent generic substitution plans. Some of these games include:

  • Coming out with new formulations, just to extend the patent;
  • Marketing directly to patients to ask for the brand by name; and,
  • Encouraging physicians to prefer new costlier drugs that may not be more clinically effective than their predecessors.

The OxyNEO Example

We noticed that OxyNEO is listed on Tier 3, whereas other opiate analgesics are listed on Tier 1. We asked Helen Stevenson, CEO of The Reformulary Group, to explain the rationale. Reformulary Group’s committee of unpaid doctors & pharamcists found that the OxyNEO 80mg dose was much too high for an already dangerously addictive medication and therefore, access should be restricted. There are other pain medications on Tier 1 with lower risk profiles, and therefore, better for patient safety.

We were impressed that the decision had everything to do with patient safety, and nothing to do with cost. That was one of the details which provided us with the peace of mind that the formulary was more powerful than a “mandatory generic” formulation – there were thoughtful decisions around each DIN, and that gave us the confidence to recommend Reformulary.

The Adderall Example

We further found that the Reformulary is not just about slashing coverage to minimize costs: Adderall is a prescription drug prescribed for Attention Deficit Hyperactive Disorder (ADHD). Nicole Pierce, Business Associate at Reformulary Group, explained:

“This drug is actually more expensive than all of the other ADHD drugs currently on the market but unlike those drugs it is only a once-daily dose (others are twice-daily). Our committee felt that this is a significant benefit, as many children taking ADHD medication have difficulty bringing their medication into schools etc. and this drug has the ability to improve and simplify adherence. Therefore, we have placed this drug on tier 1 – there is a generic now on the market for Adderall that will be placed in tier 1. The brand will be moved to tier 3 once all provinces have declared interchangeability.”

Implementation at the Carrier

We vetted The Reformulary Group for two years before deciding to use their formulary for plan sponsors who opted in. We credit our trusted partner, The Co-operators Life Ins. Co., for having the vision and ambition to take on this project. Their head of group benefits and head of product development oversaw the project, and we were impressed with their desire to innovate in an increasingly commoditized industry.

Implementation at the Plan Sponsor

In order for the implementation to be successful, the concept had to be understood from the top. We made sure that Reformulary would not be implemented unless the highest decision maker fully understood the plan, and the company agreed to the full communications strategy. If the company declined any of the communication pieces below, we recommended not to move forward. Educating plan members involved the following steps:

  • Providing a minimum of two months’ notice;
  • Individual employee letters;
  • Employee town-halls or one-on-one meetings with those who raised their hands for help;
  • Wallet cards;
  • Posters; and,
  • Hand-holding: employees had the choice to bring their script to a claims service rep who would provide a customized letter for their doctor, and walk them through the process.

We found that only a handful of individuals in each group were affected. We received a minimal amount of phone calls and therefore, a smooth transition.

Financial Results: an 18% difference

The results have been better than anticipated. Reformulary was able to decrease our plan member’s drug costs from between 10% to as much as a staggering 40%.

After the first 8 months (April 1 2015 to Dec 31 2015), groups who had switched from a generic substitution plan to the Reformulary plan saw an average decline in drug costs of 9%. Groups who did not use Reformulary saw an average increase in drug costs of 9%, an 18-point spread.

That said, the data does not yet represent a full year, but we are confident assuming that there is limited seasonality in the consumption of maintenance medications, and that it does not drive a significant difference.

One group had a 1.8% increase in drug spend after implementing Reformulary, however, that was due to the addition of two new biologic drugs. Had we not recommended Reformulary, the renewal would have been much worse. Reformulary turned a potential 15% increase into a net neutral position, thereby helping the client, and also saving us the threat of an external competitor marketing the plan.


At Beneplan, we are proud to be using this unique tool to keep benefit plans sustainable, attract new groups, and remain competitive.

We took a step into this project expecting tepid results, as we have been let down by other plan designs du jour which promised the moon, but produced disappointments.

Reformulary is one of the decisions we stand by, and we hope you will too.

Yafa Sakkejha is the General Manager of The Beneplan Employee Benefits Co-operative. The Beneplan Co-operative is a buying group for small & medium companies. She has a Bachelor’s of Commerce degree from Queen’s University. She can be reached at yafa at beneplan.ca or 1-800-387-1670 x252.