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© Copyright 2000 Rogers Media. The following article first appeared in the April 2000 edition of
BENEFITS CANADA magazine.
Saving the drug plan
Canadian benefits plan sponsors, providers and plan members need to work together towards a cohesive
approach to drug plan management. The status quo is not sustainable. By Susan Bowyer and Margaret French
The management of drug plans for Canadian employers is a hot, sometimes volatile, topic. The scene has been
moving fast and furiously, and will change with even more intensity in the years to come.
With prescription drug expenses typically ranging between 1% and 1.5% of pay, and expected inflation of 15%
annually, these costs will double over the next five years. Perhaps the solution for employers--and the
drug service offering industry in general--is to go back to the fundamental elements we learned in grade
school: education, sharing and most importantly, working together.
There is no doubt employers face a dilemma regarding the management of drug plans for their companies. In
fact, the Employer Committee on Health Care -- Ontario (ECHCO) research from 1998 estimates that $6.5
billion was spent annually on prescription drugs in Canada with employers paying half. That number will
continue to compound rapidly.
It is important to be aware that there are many elements contributing to the onslaught of problems,
information and costs. However, companies are trying to rectify the problem. Although there is no ultimate
panacea, the immediate solution that almost all employers are, or should be, striving for is one of
education and co-operation.
LOOKING BACK
Historically, plan sponsors developed a number of solutions to address the problems that arose from their
drug service offerings. Initially, employers covered everything with small deductibles. To help reduce
costs, companies removed over-the-counter drugs from their offerings, and put caps on lifestyle and
high-cost drugs for such things as fertility, smoking cessation and weight loss. Further steps were taken
to increase efficiency and decrease costs, including increased co-payments, the introduction of dispensing
fee caps and the drug card, as well as other steps such as mail order drugs.
As time and benefits progressed, there have been actions taken to keep costs down. Pharmacy benefit
managers (PBMs) and formularies were introduced in conjunction with deregulation of ingredient cost
mark-ups in Ontario, which included generic substitutions and opportunities for drug utilization reviews.
However, what is apparent when one looks at the historical actions taken regarding drug service offerings
is that the attempts were reactive--and whenever a solution was found to a particular problem, another
problem always arose.
ESCALATING ISSUES
Today's environment is different. Employers have a number of escalating issues to contend with. The overall
increase in the number of new drugs on the market--including lifestyle (of which there are differing
definitions) and some high-cost drugs--and the predictions of an accelerated rate of new drug emergence on
an annual basis are significant.
Employers have been faced with the dilemma of deciding on individual drugs, as demonstrated in the
extensive Viagra debate. Meanwhile, they don't have the time or expertise for this type of drug-by-drug
education and decision making. Out of necessity Canadian organizations need to assess their drug plan
philosophy. In fact, this is an opportune time for employers to address their overall benefits plan
philosophy.
Employers and consumers have become increasingly aware of how overwhelming the rate of new drug
introductions is on healthcare providers and their ability to keep pace and be fully informed. Concerns
arise about appropriate prescribing, waste and increasing utilization. However, different stakeholders come
at the problem with different agendas, and there continues to be no cohesive approach for handling the
onslaught of new drug therapies.
LOOKING AT SOLUTIONS
At the moment, interest in external factors--including legislative issues surrounding patent laws and
privacy, drug interchangeability, direct-to- consumer advertising, the national pharmacare debate and the
overall restructuring of the healthcare system--is high, while knowledge is relatively low. ECHCO is
collectively and actively exploring solutions for better drug plan management. However, more employers need
to seriously look for solutions and get involved. Of course, the issues and debates differ from province to
province.
Employees, on the other hand, want to choose their own drugs, explore new treatments and are more open to
learning about their healthcare, including requesting specific treatments from their doctors. Still, most
plan members are not fully aware of the extent of the emergence of new drugs and the dilemma faced by their
employers.
We are seeing the use of more pre-authorizations for some of the new drugs, utilization reviews, disease
management programs and a move toward trial prescriptions and step therapy (see "Cost-saving tools," page
53). Quick solutions are no longer acceptable. With each stakeholder developing solutions independent of
other players, teamwork is crucial to combat overwhelming problems and issues.
PHILOSOPHICAL DEBATE
An interim step would be to ensure your program has appropriate high amount risk protection. But the first
real step is for organizations to determine their philosophy behind program offerings. The philosophical
debate hinges on what employers want their benefits and drug plans to consist of and, more importantly,
determining the reasons why they provide benefits to begin with. Taking a long and hard introspective look
at why organizations are providing benefits will make it easier to develop next steps.
Too often companies continue to offer rich benefits plans because they are believed to be a drawing card
and retention tool for workers. However, it's questionable whether or not these types of benefits programs
really attract and keep valuable employees.
If benefits programs are being offered to provide assistance to employees for typical medical expenses,
perhaps plans can be replaced with cash in lieu of benefits. If the intent of the program is to protect
employees from unexpected catastrophic medical costs, then introducing high deductibles similar to auto
insurance might be appropriate.
Then again, some employers are genuinely interested in programs that help keep their employees healthy. The
question is, do they work? And shouldn't healthcare be a shared responsibility?
Once organizations have decided whether they want to provide benefits programs and why, only then can they
develop a program that meets their objectives. For those who decide that a program is desirable, a
pharmoeconomic approach to drug plan management is needed (see "What is a pharmoeconomic approach?"). That
requires bringing together all the players--employers, employees, insurers, consultants, pharmacists,
government representatives, pharmacy benefit managers, physicians and other healthcare providers. Employers
want a plan design and approach that ensures optimal care and cost effectiveness.
NEED FOR ASSESSMENT
Simply put, a process is needed to assess the clinical effectiveness and return on investment for drug
programs, including whether or not certain drugs are worth an added cost. The analysis must take into
account that a large portion of drug costs are for dependents and, for many organizations, retirees.
We also need to assess the inclusion of drugs based on medical necessity, efficacy, safety and cost. As
well, adjudication guidelines need to be founded on individual circumstances and the clinical indications
and individual characteristics of each patient. Some difficult questions will need to be answered, such as
whether to pay a high cost to extend life for six months or a year.
Moving forward, it is evident that the underlying solution to the drug management problem is better shared
communications and data, along with a change in culture. These changes may mean having to explain why a
drug is covered for one employee but not another; why employees may need to manage their own health plan
dollars; the possible need for employees to take steps to protect themselves from catastrophic risks; and
responses to quality of life issues that are often emotional for the individuals involved.
If players look for opportunities and forums that are beneficial to effective communication, all will be
winners in the end. Canadian companies can and will find ways to rectify the current situation. However,
the best and easiest way for all stakeholders to do this is to look back to the basics learned in the
playground--share your resources, communicate clearly and effectively and play nicely with your neighbours.
Not bad advice at all.
Susan Bowyer and Margaret French are benefits consultants in the healthcare and group benefits practice of
William M. Mercer Limited in Toronto.
*** ***
What is driving increased drug costs?
Here are some of the factors influencing drug costs faced by employers.
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Aging workforce. Day by day, baby boomers are inching their way towards retirement. But along
with this comes age-related illnesses.
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New discoveries. Recent and expensive drug therapies are being released to Canadians in record
numbers. The Human Genome Project, for example, allows for improved and earlier detection of
ineffective drugs.
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Merging pharmaceuticalmanufacturers. Consolidation in the pharmaceutical industry will have a
major impact on the Canadian drug service landscape.
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Direct-to-consumer advertising. Although predominant in the U.S., Canada is preparing itself for
direct drug advertising. Canadians have no doubt already been affected by exposure to American
advertising, and consumers will continue to be influenced by this communication tool.
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Shorter hospital stays. Currently, the province pays for drugs when individuals are in the
hospital. With shorter hospital stays, treatments and therapies are now administered at home.
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Waste. In March 1998, The Hamilton Employers' Regional Health Partnership in Ontario conducted the
largest to-date medicine cabinet clean-up report. The results on the amount of wasted prescription
drugs were astounding.
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Prescribing guidelines. Until there is a complete process and guidelines for appropriately
issuing drugs, costs will continue to skyrocket.
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Increased stress. Globalization and technology advances, coupled with the pressures of home
life, are all contributing to more employee stress.
*** ***
Cost-saving tools
Trial Prescription programs address the issues of wasted drugs and adherence to drug treatment plans.
Rather than filling a full prescription, it can be partially filled to determine suitability and possible
side-effects to the patient. Patient and physician consultations may be conducted by the pharmacist. The
program is suitable for treatments that may require varying doses and changing therapies.
Step Therapy is a clinical program that is suitable for prescriptions for which there are comparable drugs
for the treatment of specific conditions. First line therapy may be suggested before incurring costs for
more expensive second line therapy.
*** ***
What is a pharmoeconomic approach?
Pharmoeconomics is a drug assessment that weighs the medical necessity, efficacy and safety of a drug
against its cost. In addition to clinical outcomes and associated success rates, the economic assessment
may take into account whether it would be beneficial in reducing absence or disability costs, and improving
productivity.
*** ***
Can we talk?
How are employers communicating the problems of drug pressures to plan members?
Are Canadians buying into it? Do enough plan members understand the pressures on their plan sponsors to
manage the formulary? Here are the views of two plan sponsors.
"For the most part, employers have not been communicating the problems of drug pressures to plan members.
If there is any communication, it is managed on more of a reactive basis. Most plan members don't
understand the pressures. It's not a matter of not caring, but a matter of the problems not being reflected
clearly to the employee. The cost of drugs doesn't hit them --whether they're in a flex plan or not. The
traditional formulary model doesn't work. The provider industry must get its mind around different ways to
re-think the approach. The current model of simply 'it's in or out, or it should be capped or not' is not
effective."
Gretchen Van Riesen, director, pension and benefits policy, Canadian Imperial Bank of Commerce, Toronto.
"For the most part, we rely on carriers to administer the plans, and any problems that occur after that are
handled on an individual basis. Plan members believe that doctors are gods who know exactly what the
individual needs and that they should not be challenged by the employer. Employees don't feel the employer
should have a say, they feel it's an issue between the member and the doctor. However, some plan members do
care [about the pressures on their plan sponsors], and are willing to take measures to help employers
reduce costs."
Eva Csendes, senior staff assistant,
General Motors of Canada Ltd., Oshawa, Ont.
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