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Canadian organizations are considering innovative strategies as a means to better manage their prescription drug costs but are slow to actually put these solutions in place, according to a new Aon Hewitt survey.
Despite the fact that prescription drug costs have increased at least 8% per annum over the past few years, they make up an average of 60% to 80% of companies’ health benefit budgets. And, few plan sponsors have introduced leading-edge approaches to contain costs, such as managed drug formularies and optimized provincial plan co-ordination, and educating employees with targeted messaging for specific drug classes, according to the survey—although 30% of respondents indicated a willingness to consider these options at some point in the future.
According to Tim Clarke, Aon Hewitt Canada health and benefits innovation leader, plan sponsors should consider incorporating these key elements into their cost management strategy. “Fewer than 10% of survey respondents currently have preferred provider pharmacy arrangements, encourage mail-order delivery for maintenance drugs, negotiate discounts or provide case management for high-cost claimants. These strategies may provide significant savings in the next few years.”
Recent regulatory changes have been enacted to help stem the rapid increase in drug prices. Several of the more commonly prescribed drugs are scheduled to lose patent protection soon, which is likely to result in the availability of less expensive generic versions. And several provinces have passed legislation to regulate generic pricing, which should drop the average cost of many drugs set to come off patent. Shawn O’Brien, a senior health and benefits consultant with Aon Hewitt, says that while these are positive developments for drug pricing, they may be causing a false sense of security among plan sponsors.
“These factors have led some plan sponsors to conclude that their drug plan expenses will decrease even if they do nothing,” said O’Brien.
Clarke says the prescription drug landscape is changing and it would benefit plan sponsors to think long term when it comes to developing a cost management strategy. “The number of biologic drugs in the pipeline is increasing—which is great news for those suffering from chronic conditions such as rheumatoid arthritis, multiple sclerosis, Crohn’s disease and lupus. The challenge for organizations is that these drugs cost $20,000 to $50,000 per year per prescription, and as much as $100,000 for some rare diseases. Organizations need affordable solutions that help employees and family members suffering from these conditions.”
The news isn’t all bad, though. According to the survey, 47% of respondents indicated that they are ensuring reductions by requiring mandatory generic substitution, while another 30% stated they are considering taking this action. Eighty percent said they have introduced pay-direct drug cards and 12% are thinking about introducing them; 46% encourage plan members to request a 90-day supply for refills, with another 36% are considering doing so; and 32% require pre-authorization for certain high-cost drugs, while another 34% may do likewise.
Clarke and O’Brien advise that plan sponsors review their drug plan usage before implementing any cost-containment solutions—something that 84% of respondents indicated they already do at least annually. Through analysis of employee prescription drug usage and trendspotting, organizations can pinpoint areas of concern. More sophisticated benchmarking and cost-projection modelling provide additional insight. Armed with this information, plan sponsors can determine which modifications would have the greatest impact on current and future drug plan costs.