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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.”

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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.

© Copyright 2014 Rogers Publishing Ltd. Originally published on benefitscanada.com
See all comments Recent Comments

Scott Warner:

It is very puzzling why this industry careens forward with axioms such as “The challenge for organizations is that these drugs cost $20,000 to $50,000 per year” in reference to biologic treatments – calling them drugs I think indicates a distinct lack of understanding of what they are and what they do – Why is it a challenge for organizations? Why should it be? The more pertinent question is or should be – What is an employee benefits programs purpose? As a plan sponsor do you feel it your duty to pay for every new health therapy introduced? Since when did you the plan sponsor become the gatekeeper of health care in Canada? But perhaps the most important questions is – Where are the elected officials in this? and Why are we condemning our economy to this albatross? Benefits programs began covering sundry health expenses, are we to now accept that they are indeed the frontline of payment for health care in Canada? If you remove biologic therapies from the payment equation are drug costs even increasing? In the face of this revolution in treatment and cost that people are still talking about “mail order pharmacies” is rather suspect.

Friday, May 20 at 8:03 am | Reply

Bob T:

To Scott, if biologic ends up being set up as a drug with a DIN, then it falls under the benefit porgram which covers drugs which are prescibed by your doctor to treat an ilnees/injury. Unless the wording changes, it is covered. Why chould sponsors be concerned, if one of my 20 employees has a $50,000 a year drug, I cannot afford to continue my health care program. Plan sponsors wrote policies years ago and without review, this may not be unlike the DB ppension world, it may disappear.

Thursday, June 02 at 7:40 am | Reply

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