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© Copyright 2000 Rogers Media. The following article first appeared in the October 2000 edition of
BENEFITS CANADA magazine.
2000 Drug Trends
An absence of new blockbusters on the drug scene this year hasn't stopped most employers'
prescription costs from climbing. Plan sponsors need to develop cost-containment strategies that will help
them manage the onslaught of new drugs in the pipeline.
By Celia Milne
Hanna Little, 34, from Oshawa, Ont. has a lot on her plate. She works, runs a household, and is the mother
of four-year-old triplets. She also suffers from chronic rheumatoid arthritis (RA), which she has had since
her twenties. Her only reprieve up until recently was the nine months of remission she enjoyed while she
was pregnant. After Megan, Ryan and Molly were born, the disease came back with a vengeance.
Over the years, through the direction of her rheumatologist, Little has tried many of the latest
medications as they came on the market. But her pain and disability persisted. "My arthritis was so bad, so
out of control. It felt like someone had taken a sledgehammer to my feet," says Little, who is affected in
her feet, both ankles, her right elbow, both hands and her shoulders.
Relief has finally come to Little in the form of an experimental drug called Remicade, a monoclonal
antibody originally approved to treat Crohn's disease, which is now being tested in RA patients. "Last
March I went on this new study drug, and I felt better within 24 hours," she says. It's now October, and
Little still feels great.
Remicade may be effective, but it isn't cheap. It costs a whopping $14,000 a year, but Little doesn't have
to think about that yet. The manufacturer is providing her with the drug at no charge for the duration of
the trial. But after the drug is approved in Canada (it is already on the market in the U.S.), she will
have to figure out how to pay for it. "I doubt my employer's or my husband's employer's plan will pay for
it," says Little, adding, "I don't know what will happen then."
The apprehension Little is experiencing about the high cost of her medication is part of a wave of
uncertainty that is going to be felt in the next five years by consumers, employers, insurers, consultants
and drug manufacturers. Who will pay for promising--but expensive--new drugs?
At the moment, the question is somewhat academic, as 2000 has been a relatively quiet year for new drugs
and the economy has been strong. But the high expense of drugs coming down the pipeline in the next five
years may force a change in the way plan sponsors cover drugs, which may put more of the onus on the
government to re-examine provincial plans.
LOOKING AT COSTS
According to the most recent annual report of the Patented Medicine Prices Review Board, sales of patented
medicines increased by 27% in 1999 in Canada. In 1999, U.S. employers paid 17.4% more per member per
prescription than the previous year, according to the latest report (June 2000) from pharmacy benefit
manager Express Scripts. The report notes that this increase is the highest since the company began
monitoring drug costs seven years ago. Despite the fact that drug spending is rising at an alarming rate,
this year has actually been relatively quiet on the new drug front--representing the calm before the storm
in terms of new drug launches.
"We're in a lull right now," says Barry Noble, national director of managed care at Manulife Financial in
Toronto. "This year we haven't had a single drug launch that you would classify as a blockbuster. We're in
this period of time when we have not had a new introduction that represented a significant percentage of
drug spending."
With most new introductions, utilization gradually climbs over several years as word of mouth spreads,
doctors familiarize themselves with the drug and studies confirm its efficacy. Usage typically peaks a few
years later. That scenario is happening right now with a lot of drugs, but none of the brand new ones have
impacted employers significantly, yet. "The employer might be concerned if one drug increased exposure by
2% to 3% [as in the case of Viagra], but if one single new drug increased exposure by 0.1%, then it's not a
big deal," explains Noble.
NOTEWORTHY DRUGS
Several drugs were approved in Canada in the last half of 1999 and first half of 2000 that are important to
employers. Plan B, an emergency contraceptive, is a political hot potato. It is the cumulative effect of
the number of new drugs that makes a difference. On the one hand Plan B, produced by Paladin Labs, can be
regarded as a lifestyle drug as it's designed for partners who have not used effective means of birth
control and are confronting an unwanted pregnancy. On the other hand, it could save plan sponsors a lot of
money related to maternity leave and unwanted pregnancy. Taken within 72 hours of unprotected sex and then
again 12 hours later, Plan B reduces the chance of pregnancy to as low as 1%.
Also noteworthy are the new flu drugs. Glaxo Wellcome Inc.'s Relenza is a type of flu-fighting drug, called
a neuraminidase inhibitor, in powder form. It's designed to be used within the first two days of having the
virus and costs approximately $35 per prescription. Tamiflu, by Hoffman-La Roche, is another flu medication
that comes in capsule form and is restricted to those over 18 years old.
Joining 1999's osteoarthritis blockbuster Celebrex, there are a few new arthritis drugs on the Canadian
market. Most notably, Vioxx, from Merck & Co. Inc., is used in the treatment of osteoarthritis, acute
pain in adults and painful menstruation.
The difference between Vioxx and Celebrex (manufactured by Pfizer) is that Celebrex is used in RA while
Vioxx isn't, and Vioxx is used for menstrual pain whereas Celebrex is not. They are both COX-2 inhibitors,
and their popularity is due to the fact that they do not cause the gastrointestinal problems associated
with earlier drugs in the category. Last year, Celebrex--at about US$85 per prescription--and Vioxx--at
approximately US$76--captured a combined 18.9% of their market.
Avandia, developed by SmithKline Beecham, is a new drug to reduce insulin resistance and lower blood
glucose levels in people with type 2 diabetes. It's the first drug in this new class of oral antidiabetic
agents. Also of note is Exelon, launched by Novartis for the treatment of patients with mild to moderate
Alzheimer's-related dementia.
PROGRESS AT A PRICE
While these drugs, added up, are contributing to employees' quality of life, they are having a remarkable
impact on benefits costs. The near future looms much larger in terms of a dramatic effect though.
This year alone, it's estimated that $26.4 billion will be spent on drug research and development. Express
Scripts predicts that the number of new drugs coming to market in the next five years will increase
dramatically, with more than 1,000 products currently in the pipeline.
Most excitingly in 2003, when the identification of the DNA structure is complete, medications will begin
to emerge which are tailored to individual genetic profiles. Progress comes, of course, at a steep price.
Express Scripts predicts a near doubling of per-member per-year drug costs over the next five years, from
$387.10 to $758.81 in 2004.
Hanna Little's medication Remicade, at $14,000 a year, is a good example of the type of future drug that,
to employers who fully reimburse for drugs, may represent the straw that breaks the camel's back.
So what are employers supposed to do? "The only way to escape high cost like that is to get out of
providing that type of coverage," says Fred Holmes, national practice leader, group health and welfare at
Buck Consultants in Toronto. But he warns that when employers restrict access to certain drugs, they may be
causing a myriad of unforeseen problems.
In some cases, providing less-than-ideal therapy can result in lower productivity, increased hospital costs
and a need for replacement workers. It can also result in legal problems. For instance, a member of a plan
who desires a high-cost new drug that has been excluded from the benefits plan could bring a case before
their provincial Human Rights Commission, attempting to prove the exclusion violates their rights based on
gender, age or disability.
In fact, according to Holmes, some plans are already breaking the rules. "A lot of restricted formularies
that are out there are outside the law. But law is driven on a complaints basis." Clearly, trying to
exclude a drug like Plan B (the latest emergency contraception drug) may prove sticky. "No employer wants
to touch it, but they can't discriminate," says Holmes.
PAYMENT OPTIONS
For these various reasons, there is a movement away from formularies as a solution to the drug-cost
conundrum, says Noble. "Formularies are an old-fashioned solution," he says. Progressive plan sponsors, in
the U.S. anyway, are moving more toward systems in which the employee shares part of the cost, and
therefore cares about the expense, explains Noble.
The trendiest new system, says Noble, is a three-tier co-pay. The consumer may pay a $5 co-pay for generic
drugs, a $10 co-pay for brand name drugs and $25 for lifestyle drugs. Here in Canada, a few pharmacy
benefit managers are in the process of developing three-tier co-pay systems.
As a way of simplifying drug coverage altogether, more Canadian employers are developing health spending
accounts for their workers. Each employee is allotted a set amount, say, $1,000 a year, to spend on
healthcare, and there are no restrictions on drugs. "I think there's a good argument for that route, but it
will require the employer to have a strong stomach because some families will need to spend more than
$2,000," says Holmes. Limited coverage such as this will also open the door for a national pharmacare plan,
as people with expensive drug needs will start clamouring for the government to pay for drugs employers
used to cover.
Overall, most companies are actually doing little to contain costs, says Holmes. Most plans still have
1970s-style coverage with full reimbursement, a nominal deductible and a small co-payment. "There are
zillions of those plans out there," he adds. "Down in the trenches nobody really wants to change. The
decision makers are all in a conflict of interest. They are employees too. They haven't even taken the
fundamental first step of raising the deductible."
Indeed, employees of steel giant Stelco only pay 50ยข when they receive a prescription. A reluctance to
share costs with employees means tough decisions must be made in the benefits trenches. As Mike Nykolyn,
pension and benefit administrator for Stelco Hilton Works in Hamilton, Ont., puts it, "there are only so
many benefits dollars to go around." And there are some drugs Stelco can't afford.
Stelco's plan covers 7,000 employees, about 5,000 of whom are unionized, as well as about 8,000 retirees
and the families of both groups, for a total of 30,000 lives. Stelco is a good example of the drug-by-drug
decisions that are being made as new medications come to market.
In the 1999-2000 line-up, there are drugs the company decided not to cover, some for which they agreed to
blanket coverage and some for which they agreed to cover only in certain circumstances. For instance,
Stelco excluded Viagra ($24 a pill) on the grounds that it was not medically necessary. With Celebrex, they
decided that even though it was expensive it would probably save some medical costs later on. So far, says
Nykolyn, that savings has not emerged, but he says the company "still has a problem denying it." It's their
most highly used drug.
A drug that fell into a grey area was obesity drug Zenecal. The company decided that to get coverage, an
employee had to have a body mass index (BMI) over 30, or a BMI of between 27 and 30 with a co-existing
condition such as diabetes.
The philosophy of Stelco is to explore the pros and cons of each new drug as it comes on the market. There
is also a strong commitment to providing ongoing education in different therapeutic areas for employees and
the community, and this has had a positive effect on costs.
Educating patients is a critical step in closing the circle of uncertainty around new drug coverage. If
employees who take the medications are compliant and understand the challenges regarding cost, then
medications will be used more responsibly, and all parties benefit. Beyond that, plan sponsors would do
well to use the lull of 2000 to prepare for a possible explosion in new drugs over the next five years.
Celia Milne is a Toronto-based writer and regular contributor to BENEFITS CANADA.
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