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© Copyright 2000 Rogers Media. The following article first appeared in the January 2000 edition of
BENEFITS CANADA magazine.
New drugs and liability
Is your drug plan a lawsuit waiting to happen? As blockbuster drugs tumble
into Canada, make sure that your plan has a plan.
By Hugh O'Reilly
Recently, a number of high-profile drugs, including Viagra, Celebrex and Xenical, have been introduced into
the Canadian marketplace. Drugs of this nature create special issues for employers who sponsor prescription
drug plans. Many of these drugs are expensive and may result in increasing employee demand.
A decision to exclude certain drugs from a benefits plan could give rise to employer liability if the
process is not properly handled.
To make matters even more complicated, it would also seem that we are at the beginning of a cycle in which
a large number of what some people call lifestyle drugs will be introduced into the marketplace.
In order to best protect yourself from liability you need to plan ahead, communicate with your plan members
and consider implementing novel benefits plan designs.
Whenever a drug is excluded from a drug plan an employer runs the risk that an employee will claim that the
exclusion constitutes discrimination under human rights legislation.
While it is not possible to predict how such a claim would be adjudicated by a human rights commission, it
is possible to suggest some steps that might lessen the likelihood of such a claim.
First, employers should consider an open and ongoing dialogue with employees. The philosophy and purpose of
the drug plan should be properly explained to employees. For example, is the purpose to provide all drugs
to all employees or is the plan intended to assist employees in purchasing prescription drugs?
If the purpose is not properly explained, employees may well assume that the plan will provide them with
every drug a doctor prescribes. From an employee relations, as well as a human rights, perspective it is
important to manage employee expectations.
How can plan sponsors tackle this issue most effectively? Fred Holmes, senior consultant at Buck
Consultants Limited in Toronto says addressing the issues from a benefits plan design perspective is a
great place to start.
He believes that the type of plan an employer implements should reflect its overall philosophy. Some
employers might consider a restricted formulary. This model excludes certain drugs or therapeutic
classifications from coverage. In the absence of a proper communications process it may give rise to
employee discontent that could translate into legal claims.
Holmes believes that employers should consult with a team of advisers to develop a restricted formulary.
Consultation should result in the plan sponsor being in a better position to meet plan member relations and
legal challenges.
A more interesting concept, Holmes contends, is a plan that provides life-sustaining drugs and a set sum of
money per month on a co-pay basis for employees to purchase prescription drugs. This type of model provides
cost containment to employers, covers catastrophic illnesses and is likely to be seen as fair by employees.
A more novel model is a group registered medical savings plan (RMSP). This model would be similar to a
registered retirement savings plan and, depending on how it is designed, would require an amendment to the
Income Tax Act.
Both the plan sponsor and members would contribute to the RMSP. Contributions could be used to purchase
individual health insurance policies or to accumulate funds and disburse funds to pay for required
prescriptions.
The advantage of this type of model is that it gives plan members a great deal of control over their drug
benefits and allows them to tailor the plan to fit their needs.
We are at the beginning of a new era in which a large number of high-profile--and expensive--drugs will be
introduced. Says Holmes: "The challenge presented by these new drugs is made even more interesting because
it is occurring at a time when both employers and governments are cost-shifting to employees."
Based on this perspective, it would seem that advance knowledge is power. Whatever plan design you choose,
you can't lose by being proactive, planing ahead and communicating with your members. You'll have a better
chance of maintaining a positive workplace environment--and protecting yourself from legal liability.
Hugh O'Reilly is a lawyer with Tory Tory in Toronto.
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