‘The sky is not falling’ on drug costs

While Canadians hear about the high cost of drugs all of the time, “the sky is not falling,” said Jim Favaro, senior manager for private payers at Amgen Canada Inc.

Favaro, speaking at the Calgary Drug Trends Summit on Nov. 23 on behalf of Innovative Medicines Canada, said he believes plan sponsors need to take a broader view of their overall drug and health plan costs in order to ensure the sustainability of their private drug plans. Growth in drug costs is cyclical, he said, suggesting Canada is currently in a period of low to moderate increases.

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In Canada, the total cost of drug claims consists of more than just the drug ingredients, he noted. Typically, 58 per cent of the cost is the drug list price, while 22 per cent is the wholesale markup and pharmacy professional services fee. Insurance charges can be up to an additional 20 per cent, according to Favaro.

With private drug plan costs growing by 4.1 per cent in 2016, if plan sponsors are seeing renewals above that amount, “they need to look at the deeper reasons and ask why,” said Favaro.

“Our guidance to plan sponsors is to ask their insurance companies and advisors what insurance companies are changing in terms of plan design that will create cap space for innovation, while minimizing the impact on access. For instance, some insurance providers have implemented reducing the frequency of refills for chronic medications as a way to limit markups and fees while not impacting access. Drug transparency is important. You need to take a holistic look at your drug plan and what is driving your growth.”

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In the meantime, current trends indicate a movement towards sharing costs with plan members, third parties and manufacturers, Favaro added.

“Innovative companies understand that the private system is under pressure to keep up with advances in medicines. We want to work collaboratively with insurance companies and plan sponsors to find a solution, so that plan members can benefit from new therapies. When these medicines are used in an appropriate way, they can make a profound difference in keeping employees healthy and happy at work.”

Many new medicines are in development but not all of them will come to market, according to Favaro. “We have to invest to find the next great discovery. Our industry dramatically changes lives, and we want to keep raising the bar.”