The World Health Organization defines a rare disease as having a prevalence of 65 or less per 100,000 individuals.

It recognizes some 5,500 rare diseases, the majority being of genetic origin and often life-threatening. Medical research has yielded significant drug development for the treatment of rare diseases, increasing life expectancy and improving quality of life. However, these medical advancements come at a steep price, from $300,000 and more per year on a chronic basis to a one-time gene therapy costing $3 million.

Drug industry experts estimate public plan spend for rare disease drugs will top $1.6 billion by 2025, up from $381 million in 2020. Group insurers estimate private spend to be $650 million in 2020.

Read: Highest-cost drugs reimbursed by Canadian public plans in 2021/22 were rare disease treatments: report

These medical advancements are welcome news to affected individuals and their families and it’s important that private plans closely examine coverage of these claims. Group insurers already offer several plan design features that will help ensure appropriate use and provide adequate coverage.

Drug monitoring programs

The industry has seen the creation of drug monitoring programs in recent years. These programs aim to exclude coverage listings for drugs that don’t offer significant cost-effectiveness to the plan. Any new drug, including those for rare diseases, must undergo the drug monitoring process.

Hospital drug policy

Because of the complexity of drug administration, several rare disease drugs are classified as ‘hospital drugs’ and are therefore excluded from private plan coverage. More attention should be paid to clarify what is covered — or excluded — under the hospital drug policy and how coverage is determined under that policy.

Provincial integration

Provincial coverage is sometimes offered for rare disease drugs via a deductible-based universal drug plan (such as Ontario’s Trillium Drug Program) or with the provincial senior drug plan for individuals aged 65 and older. Special programs where eligibility may also hinge on whether the claimant has private coverage may also be available. The bill for Canada’s national pharmacare program is currently awaiting approval from the Senate and should the universal aspect of this national drug plan prevail, a carve out of benefits — when rare disease drugs are listed on the national pharmacare formulary — would be possible.

Read: Sounding Board: What plan sponsors should know about pharmacare

Prior authorization

This process ensures that coverage is granted to the claimant for appropriate use by prescribers specialized in the disease state and that adequate follow-ups are performed to continue coverage.

Preferred provider network for specialty drugs

Specialty preferred provider networks offer reduced mark-up, extensive clinical experience in the handling of rare disease drugs and management of PLA in specific cases (such as free doses). Case management may also be offered.

Coordination with patient support programs 

The manufacturer’s PSP offers specialized case management and support when navigating the health-care system and the insurer’s administrative processes. The program may also allow the claimant to access compassionate coverage offered by the manufacturer if financial support is available and required.

Managed formularies

Managed formularies have been available to plan sponsors for several years. While sponsors have often hesitated to offer a restricted list of covered drugs to their employees, managed formularies offer coverage for the most cost-effective drugs, either on a single tier or with multiple coverage tiers with second- or third-line drugs as well as drugs with a low cost-effectiveness ratio on the lower coverage tiers.

Rare disease drugs are subject to cost-effectiveness requirements and if the drug’s effectiveness relative to price doesn’t meet pharmacoeconomic requirements, the drug is then excluded from coverage. Managed formularies sometimes include an ‘enhanced’ prior authorization process where coverage criteria are more stringent than the standard process.

Read: Specialty drug prior authorization a useful tool for plan sponsors

Private Listing Agreements

Manufacturer discounts on rare disease drugs may be applied at the point-of-sale or at year-end with a credit to the plan experience. Savings are usually reported in aggregate and the confidential nature of these agreements prevent sponsors from determining whether discounts were applied to any given claim. Close monitoring of discounts remitted — even if only with aggregate data — is advised.

Financial arrangements

Stop loss insurance is an invaluable tool to protect against extraordinary costs. Choosing the adequate pooling threshold while considering budget and risk level is crucial to protect the plan against extraordinary costs. Alternatively, the sponsor may set an annual or lifetime dollar cap on the drug spend. Such a cap may allow the claimant to seek alternative coverage with the public plan.

Several tools are at the sponsor’s disposal when choosing a pooling threshold or dollar maximum. Data analytics can help choose and provide an additional level of confidence by using the sponsor’s group experience and demographics when comparing multiple pooling scenarios. Using the sponsor’s own data, predictive modelling forecasts drug utilization and predicts new drug adoption, thereby considering the arrival of new drugs coming to the Canadian market.

Read: 2021 Drug Plan Trends Report: Diving deep into pros and cons of drug pooling

Collaboration for better coverage

Medical advancements have yielded new drugs for rare diseases, improving health outcomes for affected individuals. These advancements come at a high cost. Several plan design features are available to help sponsors limit undue exposure and ensure that claims for rare disease drugs are paid appropriately. Special attention should also be given to these features when working with a group insurer or when selecting a new one.

Christine Than, PharmD., is an assistant vice-president – pharmacy lead at Aon.