I can understand if the average Canadian plan sponsor has grown numb to the concept of expensive biologic or “specialty” drugs.
The topic of specialty drugs still dominates industry discussions, yet very little has changed in terms of the management of these claims. It’s as though specialty drugs have given the industry a vacation from focusing on boring traditional drug plan design in favour of having circular discussions that lead nowhere about wonderful (and expensive) innovations.
Why are we spending so much time and energy stating the obvious about specialty drugs when they account for 0.6% of all claims and 18% of plan spending? What about the 99.4% of claims that are not specialty drugs? What about the 82% of plan spending that has nothing to do with innovative specialty therapies?
I am vividly aware that specialty drugs are the fastest-growing segment of drug plans, and there isn’t a close second. I am equally aware that 13 of the first 21 new drug entities approved by Health Canada in 2012 were specialty drugs. Those are valid points, but plan designs can deal with this. Plan sponsors can put appropriate stop-loss coverage in place. They can look to establish meaningful clinically focused, evidence-based prior authorization (PA) programs (as opposed to the existing rubber stamping process found in many PA plans).
Worst-case scenario, plans that have no other option can use public sector catastrophic coverage where available, especially for small- to medium-size plans that can’t digest significant year-over-year increases in stop-loss premiums and higher attachment points. Or, do possibly closer relationships between private plans and pharmaceutical companies need to be developed?
In the meantime, can you imagine where most plans would be today if they were serious about containing costs and extracting as much value as possible from their investments in the everyday therapies? This is the area that plan sponsors and advisors need to be focusing on. Doing so can extract wasted dollars without reducing the value of the benefit to members. In fact, you can actually build a better plan for less money.
If a plan were to shave 22% off the 82% of plan costs that traditional therapies represent through better plan design and member education, the 18% of plan spending required to cover the entire specialty drug spend today would be accounted for.
Does that 22% seem aggressive and unrealistic? If you were successful in shaving 12% of the traditional spend through appropriate plan design that does not reduce the value of the benefit to any member, or adversely impact anyone, that would eliminate 10% of your drug plan spend every year.
If this seems a bit far-fetched, consider the following.
- Many generic drug prices in almost every region across Canada are less than half of what they were in 2010, yet our use of generic drugs has not grown appreciably since then, despite the major products that have lost their patent protection. It is the exception to the rule when we see active plans with generic penetration rates in excess of 50% in 2012.
- The vast majority of plans still have a completely mindless plan design with a single level of co-insurance (i.e., 80% or 90% or 100%) across the board—thereby stating that the plan considers all drugs equal in value. This isn’t 1997. It’s 2012, and that’s not the case in some very commonly prescribed drug classes.
- What if plans had incentives to mobilize pharmacists to help make their plans more cost-effective and drive better health outcomes? Doesn’t that sound like a more interesting preferred provider network discussion than simply trolling for the lowest dispensing fee?
Here are a few examples of what is happening in plans across the country while we all drink from the all-consuming goblet of specialty drug doom and gloom and sit idly doing nothing.
- Between active and retiree member benefits, one plan sponsor paid $1,092,334 in unnecessary dispensing fees for chronic medications. That figure alone represents more than 8.5% of plan spending.
- Another plan sponsor with a pay-direct drug plan is paying markups of 5% on brand drugs in some pharmacies and markups of 29% in others in the same geographic area. Some plan sponsors with legacy reimbursement plans paid an average markup of 20.2% on brand drugs on paper claims and only 7.5% through pay-direct.
- A third example is a plan sponsor that paid $84,887 in its most recent year for claims that could have been paid by public plans as first payer if the plan had implemented protocols that force public plan co-ordination of benefits.
This might seem complicated or even boring to some. But for a plan sponsor that is flushing money down the toilet every month, money that could be reinvested into other areas of the plan or used to offset investments in specialty drugs, the boring stuff needs to be what matters.
These are the views of the author and not necessarily that of Benefits Canada.