The Canadian pharmaceutical landscape is undergoing a “biologic revolution,” and there’s no end in sight. How will pharmacy care models adapt?

Biologic or “biotech” drugs are continuing to increase, both in terms of utilization and as a percentage of overall pharmacy expenditures. Pharmacy benefit managers such as Caremark and ESI report that in the U.S., biologic or “specialty” drug products currently account for about 20% of all drug expenditures, and this figure is expected to increase to more than 25% in the next few years. The rate by which specialty drug utilization is escalating—by far outpacing the year-over-year cost increases of traditional drugs—is an even greater concern, and employers are taking notice.

Care Costs

Specialty pharmaceuticals cost more because of the extensive research and development and complex manufacturing processes involved. Unlike traditional drug entities, biologic drugs are not synthetically manufactured; rather, they are large molecule drugs produced from living organisms. They typically require special handling(e.g., refrigeration due to their instability), are administered by injection or infusion, and may be used only by a small subset of the general population, which further contributes to their high costs.

Biologic drugs often cost 15 to 20 times as much as traditional drugs, so annual treatment costs routinely exceed $25,000 and can even rise to $50,000 or more per patient. Since the complex manufacturing process of biotech drugs is not easily copied or “genericized,” there’s little competition among products to drive down costs for the end consumer. While “follow-on” biologics or “bio-similars”— generically manufactured drugs that are similar to the brand name biologics—could potentially provide some financial relief, there’s still some debate surrounding the approval process and whether or not these products are truly interchangeable.

And the demand for biologic drugs will likely be even greater in the future. For example, in the U.S., there are currently more than 300 biologic drug products in the manufacturing pipeline at different stages of the regulatory process(i.e., clinical trial, awaiting approval for sale).

Given the dual threat of increased volume demands and costs in the future, plan sponsors need to take steps to maximize their investment in these novel drug therapies. Traditional short-term or nearsighted program plan design fixes alone are not enough. It’s time to develop and implement an integrated care model that focuses on the necessary infrastructure—including delivery, administration, compliance and monitoring—to ensure that ongoing investment in drug benefits is well spent.

Strategies for Plan Sponsors

For many employers, it’s difficult to justify an expenditure that doesn’t show a clear return on investment—particularly when there’s a dichotomy between the plan sponsor’s costcontainment priorities and the employee’s priority of assuring the best possible treatment outcome. However, the therapeutic advantage of many biologic drugs comes with an undeniable opportunity for improved health outcomes, as there are now revolutionary treatment options available for previously untreated or undertreated medical conditions. Instead of merely looking at the short-term costs, plan sponsors should consider the long-term return on investment, in terms of reduced duration and severity of illnesses and improved quality of life, which ultimately leads to decreased absence and increased employee productivity.

Another advantage of biologic drugs is that some biologics have also been approved for the treatment of other ailments. For example, drugs initially created to treat rheumatoid arthritis have since been approved to treat other conditions, such as various forms of psoriasis and Crohn’s disease, and may eventually be indicated for the treatment of lupus. Using the same drug to treat multiple conditions contributes to the organic growth of this drug segment without requiring any additional investment.

To help keep costs down, some pioneer plan sponsors have taken an evidence- and/ or value-based approach to formulary and plan design decision-making that revolves around exclusion/inclusion guidelines. Deciding what drugs are eligible under a drug program and at what reimbursement rate—based on clinical evidence, treatment protocols and value—is the first step in managing high-cost therapies. The decision to add a particular drug to a formulary should be grounded in the fact that there is no “one-size-fits-all” approach: although all new drugs must provide evidence of effectiveness to be approved in Canada, not all drugs are suitable or successful for treating all patients. Plan sponsors should also consider prior authorization or screening methods as part of the strategy to protect the plan from unnecessary high costs resulting from low-impact treatments that do not produce the desired effect.

Other plan sponsors have established different reimbursement rates based on individual categories of drugs. For example, compliance with diabetes therapy is vital in counteracting many future complications and costs of the disease. With this in mind, some forward-thinking plan sponsors are reducing or eliminating cost-sharing by employees for this condition to help remove potential barriers to compliance.

Model for the Future

An effective pharmacy care model must follow the philosophy that the whole is greater than the sum of its parts. In practice, this means that treatment must evolve beyond the current one-dimensional “dispensing event” to a progressive focus on the full continuum of care. Managing the disease rather than the individual drug claim is critical. And establishing an exclusive delivery and administration system is a fundamental step toward accomplishing this objective.

The future pharmacy care model brings together a dedicated, multidisciplinary clinical care team to support each and every patient, becoming a virtual “centre of excellence” in the coordination of care. The focus of this integrated model is on harmonizing the delivery, administration, compliance and monitoring aspects of high-cost therapies, which in turn lends itself to a tremendous opportunity for disease management. Establishing a team-based healthcare delivery system that integrates members across the primary care “value chain”—pharmacists, physicians, specialists and public and private support agencies—also makes the road to care more direct. The increased quality of information sharing between practitioners is an added value with this type of system.

Pharmacists working within this model will have increased exposure to managing certain diseases by virtue of the higher volume of patients they counsel compared to traditional retail-based pharmacists. Certifying clinicians as recognized disease management specialists in areas such as oncology, multiple sclerosis and autoimmune disorders will further enhance and promote the merits of these specialty pharmacies. From the patient’s perspective, another advantage is that these models typically have 24-hour support available. Unlike conventional physician/patient relationships, there are no appointments or waiting lists, as an infrastructure is in place for immediate access.

Promoting effective collaboration among clinicians may prove a daunting task. However, a dedicated treatment centre can help align provider incentives with performance. To incent delivery of the highest quality of care, a movement toward a pay for performance(P4P)system can be developed. These “high-performance” networks can help ensure the most cost-effective treatment. However, measurements defining the desired clinical outcomes and appropriate financial incentives still need to be established.

Costs Versus Benefits

So we’ve created a comprehensive, sustainable model for the future of pharmacy care…but who’s going to pay for it?

There are a few options. Pharmaceutical delivery and efficient care could be considered as important as hospital care, and therefore be eligible for public health system funding. However, given the current fiscal imbalance of the public health system, pursuing this option may be an uphill battle. Alternatively, insured programs—either employer- or individually funded—could be developed in addition to existing core insurance programs to address this need.

And this investment may prove well worthwhile. Another advantage of an exclusive network is having control of both the supply and delivery chains. Centralized distribution facilities can achieve significant operating efficiencies and economies of scale, particularly when dealing with expensive and complex pharmaceutical products. Through a centralized distribution system, specialty pharmacies can enjoy volume purchasing discounts, along with any manufacturer rebates or incentives, which could be passed on to the end payer and/or help offset the infrastructure costs.

Living Well

Although they cost more, biologic drugs can prolong and/or improve the quality of life for patients with catastrophic illnesses and, in some cases, actually help regress the disease’s development. Giving their potential to turn a previously life-limiting condition such as cancer into a chronic but manageable disease, it’s hard to argue with the role of biologics in treating patients. The trick is to balance the cost of sustaining this coverage to ensure that the payer—whether it’s employer, the government or another entity—receives the highest possible value for the money spent.

Canadians have come to expect subsidies for medically necessary services that improve our quality of life, and both employers and the public system have a social and moral obligation to continue to fund these therapies. Programs designed to reduce lifestyle risk factors and support the best possible treatment for each individual situation, along with careful and thoughtfully crafted plan design solutions, are the keys to success. Employers that manage health benefits costs through plan design and innovative administration features, while also promoting selfmonitoring and wellness among employees, will be rewarded with increased productivity and a more sustainable drug plan.

Shawn O’Brien is a senior consultant with Aon Consulting Canada.

For a PDF version of this article, click here.

© Copyright 2007 Rogers Publishing Ltd. This article first appeared in the November 2007 edition of BENEFITS CANADA magazine.


Copyright © 2020 Transcontinental Media G.P. This article first appeared in Benefits Canada.

Join us on Twitter