The financial risk to employers that provide prescription drug benefits for their employees has increased significantly over the past decade. Few employers have been lucky enough to steer clear of at least one high-cost biologic and specialty drug claim impacting their experience – and regardless whether an employer has had high-cost drug claims, they most likely have felt the impact of this trend through higher large-amount pooling fees.
The vast majority of employers have multiple, high-cost drug claimants on their plan at any one time, which continues to be both a blessing and a curse. For many of those being treated with these drugs as a last resort in their battles with severe and debilitating diseases, such as multiple sclerosis, rheumatoid arthritis, psoriasis, and Crohn’s and colitis, the results can be nothing short of miraculous.
People who were unable to work and face deteriorating quality of life are often blessed with full remission and are able to return to work. The one drawback, of course, is the price tag, which for several of the most common biologic drugs is in the range of $20,000 to $30,000 per year. New treatments for Hepatitis C that, for all intents and purposes, cure the disease, can run in excess of $100,000 for a full cycle. Although the introduction of subsequent entry biologics (SEBs) may provide some future cost relief, a survey published in 2014 estimated that approximately 65% of all new drugs in development are high-cost specialty drugs.
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So, who pays for this? While large-amount pooling arrangements may soften the impact in any given plan year, the burden of risk for these drugs ultimately falls on the employer. The vast majority of Canadian employers still foot the lion’s share of group drug plan costs and many have seen their pooling fees skyrocket at double-digit inflation rates over the past few years, to the point where pooling fees on some plans exceed the cost of all other insurer administrative fees and expenses combined.
Unfortunately, there’s no quick solution. Pushed to the limits of requiring long-term sustainability, some employers have resorted to annual drug plan maximums, which, depending on which province you live in, may leave employees who need these drugs facing a financial burden they simply can’t afford.
For employers struggling with the financial costs of extended health plans and those with employees already contributing a substantial portion of their benefits cost, this may be the only viable option. However, given the choice between an annual drug maximum and contributing to the cost of pooling fees, I believe most employees would opt for the latter, up to a reasonable amount.
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None of us can say with any degree of certainty that we or one of our dependents won’t need one of these high cost drugs in the future. As an employee, I’d rather take the hit of a few extra dollars off each paycheque, than to take the risk that I or one of my dependents may need $30,000 in annual drug treatments with a drug plan that only covers up to $10,000.
This is large risk, with a low probability of an event, but a potential high cost to an individual needing such drugs. In today’s society, we have the ability to insure ourselves against most of the major catastrophes that can impact our financial well-being, such as the risk of death, disability and accidents, as well as major damage to our homes and automobiles. Coverage through an employer-sponsored drug program, however, may be the only vehicle for employees to insure themselves against the risk of needing a high-cost drug to treat a debilitating disease.
Plan sponsors considering the addition of an overall drug maximum or cap to their drug plan may want to reconsider maintaining their current drug coverage level and sharing the cost increases with employees instead. For some employees who need these high -cost drugs, it could make a huge difference in their financial, emotional and physical wellness, as well as their engagement and productivity at work.
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