The Canadian Common Drug Review (CDR) was established in 2003 to provide a single process for making formulary recommendations to most Canadian publicly funded drug plans. This paper considers the most common challenges faced by the CDR: (a) determining the effectiveness of a drug (particularly interpreting the importance of surrogate markers and changes in QOL measures); (b) the massive rise in the cost of new drugs, which, in general, does not seem to accompanied by a massive increase in effectiveness; (c) interpreting complex pharmacoeconomic evaluations which often do not provide straightforward answers about the cost effectiveness of a drug; (d) prescription creep (the tendency for drugs in the real world to be used in patients who were not studied in clinical trials, thus raising concerns about a drug's real-world cost effectiveness; and (e) ethical and societal issues, particularly the reimbursement of expensive drugs for rare diseases.