From a plan sponsor’s perspective, the best part of the changing economic landscape of retail pharmacy in Canada is that the timing could not be better.

Employers are faced with employees treating chronic conditions with more complex medication regimens than what could ever have been imagined even 20 years ago, and pharmacies are faced with rapidly eroding profit margins—the extent of which they could never have imaged even five years ago. This is bringing together two dance partners that have historically had very little to do with each other, which is nothing short of ridiculous when you consider that governments make up only 45% of drug spending in an average pharmacy and drugs still make up the biggest chunk of extended health plan spending for employers.

The employer-pharmacy relationship is starting to evolve. More innovative retail and specialty pharmacy chains are seeing that there is more to life than worrying about government drug programs, and employers become more aware of the financial impact on their business of healthier employees. The key question in this fledgling relationship is this: outside of simply filling prescriptions for plan members, is there a role for other pharmacy services within employer plans as it relates to better medication management and improved health outcomes?

Here is some interesting data to support that there is a great deal of opportunity for retail pharmacy and employers to work more closely together for everyone’s mutual benefit.

In a recent series of analytics completed by Cubic Health, only 60.6% of all diabetic claimants and 62% of claimants on cholesterol-lowering therapies were adherent with their treatment. In only 6.5% of the cases (on average) was the issue adherence  related to discontinued therapy. The vast majority of the lack of appropriate adherence was due to members not consistently filling their prescriptions at the appropriate intervals. Therefore, the cost of ensuring enhanced adherence would be relatively modest in either area, yet the potential wins for the plan sponsor (that can all be measured) are very material.

In a separate series of analytics, we found the following interesting bit of data related to diabetic plan members:

  • Fewer than 50% of diabetics in the plan population are being managed with any kidney protective blood pressure-lowering medications, and only 53% of diabetics are taking a cholesterol-lowering medication.
  • Nearly one-third of diabetics within the plan were taking neither medication.
  • One out of every seven insulin dependent diabetics did not claim for a single test strip in the most recent benefit year, while some non-insulin-dependent diabetics were claiming for as many as five test strips per day. This is a classic example of resources not being used where needed and being overused where not needed—but if nobody is paying attention, and nobody is accountable, how do we expect the situation to improve?
  • Only 52% of diabetics on oral diabetic medications were adherent with their therapy.

It would seem fairly obvious that as retail pharmacy starts to move away from an antiquated business model of being paid for the products it dispenses, to one where it is reimbursed for the clinical knowledge and medication management advice pharmacists dispense, that there is an obvious fit for pharmacy to make its relationship with employers much stronger. What is likely less obvious to most plans is how much they could stand to benefit from pharmacy’s expanding role.

The onus is squarely on the shoulders of pharmacy to measure the impact of its interventions with employers to prove its worth. This is because there are few plan sponsors that will pay for medication management services out of the goodness of their heart as they see the average day supply of chronic medications dwindling, generic penetration rates inch up very slowly, and spending on expensive biologic and non-biologic specialty drugs explode.

However, plan sponsors don’t have to wait for pharmacy collectively to make a decision, because there are innovative pharmacy stakeholders across the country that are already doing great things in their partnership with employers—you just have to find them.

Before plan sponsors start building a preferred provider network (PPN) with pharmacies based solely on the dated and misguided logic of “lower dispensing fees,” they should take the following into consideration.

  • What can a potential preferred provider do to ensure better adherence and optimize medication management with your population?  How will you measure the financial returns and compensate your partner(s) appropriately?
  • How can pharmacies help you ensure members get the treatment they need, with the greatest health outcomes (i.e., highest value) in the most cost-effective manner possible? How will you measure the financial returns and compensate your pharmacy partner(s) appropriately?
  • Start considering average day supply not simply average dispensing fee or markup.
  • Consider managing your specialty pharmacy needs differently from your traditional pharmacy needs.
  • What incentives need to be built into the plan design to make any preferred pharmacy arrangement a win-win-win for the plan, the member and your partner(s) as opposed to simply some fluffy program you can market? But that has as much substance as the current NHL lockout negotiations.

The money to fund all of these initiatives is sitting buried in your plan. Plan sponsors have to find that money, and pharmacy has to demonstrate the returns it can deliver. The opportunities here are very exciting.

Mike Sullivan ( is president of Cubic Health, an analytics and drug plan management company based in Toronto. Follow Mike on Twitter at @cubichealth.

These are the views of the author and not necessarily those of Benefits Canada.

Copyright © 2018 Transcontinental Media G.P. Originally published on

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