Industry stakeholders discussed the latest challenges at our 2013 Face-to-Face Drug Plan Management Forum in Toronto

Private drug plans in Canada are facing an uncertain future. While the costs of many medications have decreased over the past few years as generics began replacing many commonly used medications coming off patent, those savings have been offset by the introduction of new, more effective and more costly medications; the rise in chronic diseases, such as diabetes; and expensive biologic and specialty treatments. Meanwhile, organizations are struggling to curtail rising drug costs while still trying to meet employee health needs. Never before has it been so important to understand the shifting landscape of pharmaceuticals and what the future holds for both private and public health plans.

Growth Spurt?
While drug costs have fluctuated over the years, 2013 was the third consecutive year of negative growth, noted Michael Brogan, president of IMS Brogan. “[This is] something no one would have thought possible six or seven years ago,” he said, adding that a slump in drug costs also happened in the mid-’90s—but, after three years, costs rose into the double digits. “So, are we on the cusp of renewed, explosive growth?”

IMS Brogan has developed an independent, evidence-based forecast of what sponsors of private drug plans can expect, based on pay-direct, electronically submitted prescriptions. It also looked at the direction that drug costs have taken over the past five years, “because the past five years are the best predictor of the next five years,” said Brogan. The findings project a moderate increase in drug costs of between 1.6% and 2.8% starting in 2013.

One influencing factor is new drugs entering the marketplace. There are approximately 5,000 different drugs under development around the world today, Brogan said. “In Canada, on average, about 20 new drugs launch each year. The problem is, there’s no way of knowing what those new drugs or their costs will be.” IMS Brogan forecasts the total incremental impact of new medicines for the entire 2013 to 2017 period to be between $530 billion and $592 million.

A New Model
It’s important for plan sponsors to take a balanced approach when considering how to trim costs. According to Louis Thériault, director, health economics, with The Conference Board of Canada, research from the board’s 2012 study shows that innovative pharmaceutical treatments lead to reductions in healthcare costs and productivity losses associated with illness. For example, the $1.22 billion that Canadians spent on prescription medications in 2012 generated offsetting health and societal benefits of nearly $2.44 billion. These benefits included productivity gains for the labour force, avoiding mortality and avoiding costs to Canada’s healthcare system by preventing the onset or progression of medical conditions.

However, such treatments are expensive to develop, manufacture and market. And while their benefits—both human and economic—have been proven, Canada is starting to lag in pharmaceutical innovation. A chart of the top 15 countries in the European Union that are using biologics to treat rheumatoid arthritis (published in the December 2013 issue of the European Journal of Health Economics) shows that the average market penetration is 19.1% in the EU. Ireland is in the top spot, at about 35%; Portugal is at the bottom, with 8%. Canada is at 8.5%—yet Canada is a more prosperous country than Portugal, Thériault said. “That tells me there’s something wrong with the business model.”

So what is the right model to foster pharmaceutical innovation in a fiscally constrained environment? And who should pay?

“Who benefits should be part of who should pay,” said Thériault. “And when it comes to biologics, business reaps the most benefits, as most users are working. Employers need to have a more active role in helping our healthcare system become more sustainable.”

Changes Needed
In addition to managing costs, what can plan sponsors and the industry do to maintain drug coverage over the long term? A panel of expert at the event offered their insights.

In June 2013, the Canadian Life and released a public policy paper called Ensuring the Accessibility, Affordability and Sustainability of Prescription Drugs in Canada. Three of its recommendations have become a focus of industry discussion:

  1. create a common, national, minimum standard list of drugs to which all Canadians have access;
  2. reform the Patented Medicine Prices Review Board’s mandate and practices to achieve the lowest possible drug prices for Canadians; and
  3. develop a national comprehensive strategy for drugs developed specifically to treat rare medical conditions (known as orphan drugs).

David Willows, vice-president, strategic market solutions, with Green Shield Canada—who, as a member of the CLHIA, helped to write the paper—admitted that accomplishing these three recommendations would be a challenge, especially establishing a national, minimum standard formulary. “After all, this is a competitive business, and we all believe our particular formularies provide value that the others do not.”

Dr. Philip Baer, chair of the Ontario Medical Association section of rheumatology and an executive member of the Ontario Rheumatology Association, agreed with the need for a common formulary. “I know exactly what’s on the ODB [Ontario Drug Benefit] formulary, and I know the criteria for obtaining EAP [exceptional access program] drugs. There’s one point of contact: very simple. But when someone comes into my office and says they have a private drug plan, I don’t have a clue what that means,” Baer said, noting that Canada has 50,000 private drug plans, with co-pays, lifetime limits, yearly limits and excluded drugs. “A sensible common formulary would help me a lot.”

Dr. Dorian Lo, executive vice-president, pharmacy and healthcare, with Shoppers Drug Mart, added that the pharmacy community is aligned with the idea in the CLHIA paper. In fact, the pharmacy industry and the insurance industry are currently collaborating on a paper advocating a sustainable solution. “And that’s a better approach—having industry come up with solutions rather than depending on governments—because governments are slow to change,” Lo said.

On the List
Another issue discussed was product listing agreements, in which a pharmaceutical company and the payer sign an agreement in terms of listing the product on the plan’s formulary. “They’re becoming more common in provincial drug plans but not very common in private plans in Canada,” said Suzanne Lepage, a private health plan strategist.

While there are advantages to product listing agreements—such as giving people greater access to medications—Farzad Ali, director of health outcomes and research with Pfizer, suggested that such arrangements should focus less on financials and more on drug performance. “It’s about making sure we see the right outcomes,” he explained. “We need arrangements in place to monitor performance, where we can manage disease and make sure the product is doing what it’s supposed to do. So we need to focus on performance-based agreements.”

Willows agreed. “That is why we recommended in the CLHIA paper that there should be one price for all.”

Pharma Forward
The panel also discussed the changing role of pharmacies and pharmacists. The past few months have seen many regulatory changes across the country, as well as commercial changes due to mergers and acquisitions. Lepage asked the panel what other key changes are affecting the pharmacy industry. “Certainly, the generic reform has had a profound impact,” said Leanne MacFarlane, senior director, business development, with MHCSI. “But the real opportunity is around the extended scope of our practices—for example, making sure medications are used properly, [and] medication reviews to help ensure the patient has a good outcome and employers get a good ROI by avoiding unnecessary costs.” She added that there have been preliminary efforts from government programs to further the role of pharmacists but “very little action on the private sector side.”

Another change, according to Lo, is the public’s perception of pharmacists and the services they can provide. “For example, pharmacists will do more than a million flu shots in a convenient outpatient clinic where people won’t have to wait and won’t get exposed to sick patients in waiting rooms,” he said.

The final question of the morning related to the increased interest in preferred provider networks and the advantages and disadvantages of these programs. “For consumers, there are advantages to working with pharmacies in new ways—and we’ve seen that over the past couple of years, with the introduction of designated pharmacy networks and specialty pharmacy networks,” said Barb Martinez, practice leader, benefits solutions, with Great-West Life.

She explained that Great-West has established three such networks: one with Health Forward pharmacies to handle all of the high-cost biologic and specialty drugs; another with Costco to support employers focused on costs; and another with Shoppers Drug Mart to deliver disease management and medication counselling to its clients.

“So here we have three different networks established in the last year and a half,” she added. “I think the drug plan industry recognizes the key role pharmacists play in healthcare and that we want to partner with them to benefit plan members.”

The one idea that all members of the panel agreed on was that insurers, employers, pharmacies and governments need to work closely together. Only then can they work effectively toward the goal of giving Canadians access to as many health resources as possible.

Moira Potter is a freelance writer based in Toronto.

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

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