2020 Drug Plan Trends Report: Developments, data and design

Taking a look at private drug plans in 2020, a number of trends are converging: spending on specialty drugs is continuing its upward trajectory, advancements in a number of lifechanging therapies are in the pipeline and policy developments are coming at both the federal and provincial levels.

In the face of this potential storm, plan sponsors, insurers and consultants are focusing on analytics tools and plan design as they assess the potential impacts.

Innovative therapies

With rapid innovation in cell and gene therapies underway globally, Canadian plan sponsors and insurers are keeping a close eye on the developments, both in terms of their ability to change the course of several life-threatening diseases and their hefty price tags.

In 2018, Kymriah became the first chimeric antigen receptor T cell (CAR-T) therapy approved in Canada. The treatment uses a patient’s own cells to target B-cell acute lymphoblastic leukemia in pediatric and young adult patients and B-cell lymphoma in adults. In 2019, a second CAR-T therapy, called Yescarta, for an aggressive kind of non-Hodgkin lymphoma, was also approved.

Read: New genetic therapies in cancer treatment could impact benefits plans

The development of these therapies is expected to increase dramatically. In an October 2019 report, McKinsey & Co. said it’s expecting 10 to 20 cell and gene therapy approvals per year over the next five years.

Looking ahead, Barbara Martinez, practice leader for benefits solutions at Canada Life, says she expects these treatments to have a true place in therapy, providing patients with new life-changing options. “Probably the biggest thing that we’re watching for is gene therapies, because they’re on the horizon and they really might represent great advancements, but we know they’re going to come with incredible price tags.”

In the U.S., for example, the cost per treatment of Kymriah and Yescarta range from US$373,000 to US$475,000. In Canada, cell therapies are limited to a hospital setting in certain jurisdictions, but the question remains whether restricted hospital budgets and plans to manage costs related to gene therapy could impact private payers, says Martinez.

Funding models and plan design tools for managing the impact of these therapies will likely be similar to those used for other high-cost drugs, she says. These include pooling, prior authorization, negotiating prices, health case management with a designated pharmacy network or other types of agreements with drug manufacturers.

Read: Rising cost of drugs, benefits plans top priorities for employers: survey

Specialty spending

For private plans, spending on specialty drugs has more than doubled over the last decade, according to data from the Patented Medicine Prices Review Board.

In 2009, Canadian private drug plans reimbursed 79 drugs with an annual average cost per active beneficiary of $10,000 or more, representing about 12% of total drug plan costs. By 2018, the number of high-cost drugs more than doubled to 189, representing 29% of costs.

In the same year, on the public side, the Canadian Institute for Health Information found Canadians with drug costs in excess of $10,000 represented just 2% of beneficiaries, but accounted for nearly 40% of total spending, often on an antiviral to treat hepatitis C or a biologic to treat conditions like rheumatoid arthritis or Crohn’s disease.

“With the CAR-Ts, if it turns into a clinic procedure, it may be quite different and then there’s a lot of supplemental care that has to go along with it. So for us, that’s something really important to keep an eye on,” says Durhane Wong-Rieger, president and chief executive officer of the Canadian Organization for Rare Disorders. “There are also huge additional costs that may end up back on the private drug plans, especially if there are pre-costs, testing costs, as well as followup.”

Tools to address high drug costs

With specialty drug spend rising significantly over the last decade and new high-cost drugs for chronic diseases like migraine and muscular dystrophy in the pipeline, plan sponsors are continuing to prioritize plan design and sustainability.

Jeff Boutilier, general manager of pharmacy and chief clinical officer at Express Scripts Canada, expects to see a renewed focus on plan design tools to help control the costs of both traditional and specialty medications. He says more employers will revisit managed formularies, as well as continuing to focus on prior authorization programs, step therapy, preferred provider networks and specialty pharmacy providers.

Last year, Fluor Canada Inc. moved to a flexible benefits plan to control costs and encourage employee engagement in drug therapy programs, says Michelle Ginter, the company’s senior human resources manager, noting this included a managed formulary that provides three tiers of drug coverage.

Read: Fluor Canada shares journey of move to managed drug formulary

However, she says the large number of high-cost drugs coming down the pipeline remains a concern. “[We’re] trying to figure out where that impact lies, who’s going to pick up that tab and how that’s going to affect us. From our perspective, we’ve actually almost put on every control possible in regards to containing costs, so whether it’s mandatory generic [or] prior authorization. We even have a lifetime maximum on drugs.”

The issue from a plan sponsor perspective, says Ginter, is where to go from here, making discussions with insurers and consultants essential in order to stay on top of innovations in plan design.

Drug pooling is another area that’s seen a lot of activity, says Dan Berty, executive director of the Canadian Drug Insurance Pooling Corp. In 2018, for example, drugs in excess of $10,000 per plan member represented more than 39 per cent of the total claims paid by insurance companies that are part of the CDIPC — and this number is growing by three to five per cent annually.

“Over 23,000 sponsors have benefited from drug pooling, from $10,000 and up, and many of those, I’m quite confident, would likely have either carved back their drug plans or eliminated them or their benefits outright had the pooling not been in place,” he says.

Read: Back to basics on drug pooling

Analytics is also expected to play an increasing role in drug plans this year, including around adherence and patient safety.

For example, Express Scripts Canada has developed an opioid management program that mines patient data to help pharmacies potentially reduce the day supply for patients who haven’t been prescribed an opioid in the last six months, or provide guidance on whether the patient should be prescribed a shorter-acting opioid as a first-line therapy.

“It’s reducing the amount of opioids that are out in the communities, and it’s also helping us, and also the pharmacies, better assess if someone’s going to be tolerant and if the opioid’s going to be effective for that patient,” says Boutilier.

Pharmacogenetic testing, which is advancing rapidly from pilot projects to mainstream use, is another tool aimed at managing drug plan costs and adherence. In 2019, Canada Life offered the option to certain plan member clients on disability, and it’s now been expanded to all plan members on disability, as determined by case managers. The program will expand further in 2020, says Martinez, with the launch of a plan member self-serve pharmacogenetic testing option that can be purchased through a health-care spending account.

Pharmacare questions

National pharmacare is also on the radar. In June 2019, the advisory council on the implementation of national pharmacare issued its final report, recommending that the federal government create a national pharmacare program, including a new arms-length Canadian drug agency, with a first task of creating a national formulary by January 2022. It also proposed a detailed national strategy for funding and access to expensive drugs for rare diseases, also to be implemented by January 2022.

With the possibility of national pharmacare on the horizon but no ironclad details, Willis Towers Watson’s Joanne Jung says many plan sponsors may be wondering how to prepare. “If they go to a national pharmacare [program], that will be a formulary, which is a restricted list of drugs. By moving to a managed formulary, that’s one way of possibly having early adoption of more cost-effective plan management.”

However, as Innovative Medicine Canada’s Joe Farago notes, the provinces control their own drug formulary lists, so they will have a significant role to play in any pharmacare solution — and each province has a different vision for approaching the issue to best meet the needs of their populations.

“Stakeholders and those in the private market need to be more vocal on the value of private drug coverage and that, yes, there are some gaps with private drug insurance, but it’s far easier to fill those gaps than look at disrupting all those Canadians that are currently served well by their drug benefits.”

Uptake of biosimilars

Three Canadian jurisdictions have taken steps to move patients on public drug plans from certain biologic drugs to biosimilars. Other provinces are expected to follow suit beyond 2020, while some insurers are also considering their approach to biosimilars.

British Columbia was the first province to switch patients using biologic drugs for certain indications to their biosimilar versions. In the first phase, patients using Enbrel, Lantus and Remicade for certain indications were switched to biosimilar drugs, while phase two related to patients who use Remicade for gastrointestinal conditions.

Read: B.C. government says expanding biosimilars will save nearly $100 million over three years

Since B.C.’s public health-care system includes a pharmacare program that reimburses eligible patients, private drug plans that want to integrate and shift claims costs to the program will have to ensure that affected biologic patients switch from the originator biologic to the biosimilar in sync with the change, says Suzanne Lepage, a private health plan strategist.

“If patients do not switch as required by the Fair Pharma- Care Biosimilars Initiative, their claims will not transition from private to public coverage when their deductible has been met, which could result in much higher costs for private drug plans.”

Alberta is following B.C.’s lead, requiring adults taking Enbrel, Copaxone, Lantis, Neulasta, Neupogen and Remicade to switch to the biosimilar drug before July 1, 2020. Lepage says Alberta Blue Cross, which administers the provincial drug plan, as well as private drug plans in the province, has confirmed that the province’s program will not apply to private group health plans.

And, while details weren’t available at press time, the Ontario government approved a new biosimilars policy on Jan. 30. While Martinez says it’s important to align drug adjudication closely with provincial drug programs and initiatives, she notes Canada Life evaluates each biosimilar on its own merit to determine the right strategy for each particular drug.

Read: Is nudging biologic patients towards biosimilars a good choice?

“We really have to be robust in our approach on biosimilars and not have a one-size-fits-all. So you can end up either entering into a listing agreement with the brand-name biologic to get a lower price, you could limit the reimbursement up to the price of the biosimilar, you could have preferential listings and list only the biosimilars or you could have a combination of approaches.”

Many employers are interested in better understanding biosimilars, given their complexity, says Rose Kwan, a partner in Mercer Canada’s health team. “It is not going to be an easy and quick-fix-like generic substitution, just because [of] the complexity of biosimilars. It’s a bit more involved in terms of the approval and the substitution piece.”

Joanne Jung, director of health and group benefits and pharmacy practice leader at Willis Towers Watson, highlights that plan sponsors have to understand all the implications for their plan members of both approaches, as well as the costs. “Is one more favourable than the other and what is the ultimate impact to their plan members?”

Developing policy issues

Finally, several broader policy issues have the potential to affect drug plans this year. One the industry is watching closely is the Patented Medicine Prices Review Board’s draft guidelines, which were published in late 2019 and aim to address the rules outlining new factors for setting patented drug prices.

Key takeaways

• Canadian plan sponsors and insurers are keeping a close eye on innovations in cell and gene therapies, both in terms of their ability to change the course of several life-threatening diseases and their hefty price tags.

• Plan sponsors are continuing to prioritize plan design, including implementing managed formularies and considering drug pooling and analytics.

• Policy issues, like the Patented Medicine Review Board’s draft guidelines and provincial legislation around biosimilars, have the potential to shake up drug plans this year.

The regulations, which are set to take effect in July, would provide the PMPRB with the actual market price of medicines in Canada, rather than the “sticker” price, to more accurately assess whether a price is reasonable when setting a ceiling. They will also let the PMPRB consider whether the drug price reflects the value it has for patients.

Read: What will PMPRB drug pricing changes mean for plan sponsors?

Joe Farago, executive director of private payers and investment at Innovative Medicines Canada, says these regulations are the most significant policy changes the pharmaceutical industry has seen in decades — and they come with trade-offs for stakeholders.

“One of the major impacts is potentially that the price of new, innovative drugs will be lowered by 70 per cent or more,” he says. “And for the private market, the translation would be that newer drugs that are being impacted won’t be launched in Canada or will be significantly delayed.”

Depending on how these policies are implemented, Farago says Canadians with private and public coverage could experience a lack of access to some therapies. “These new policies are not just going to be impacting very expensive drugs for rare disease — they’re going to be implemented for all drugs that will be coming to Canada, regardless of price.”

Helen Burnett-Nichols is a freelance writer based in Hamilton, Ont.