A look at the five-year forecast for drug plan cost increases

Employers will see private drug plan costs rise by about six per cent annually over the next five years, according to a prediction by a health-care research company.

Brad Millson, principal of health access and outcomes at IQVIA, presented the results of his firm’s 2017-21 forecast, produced in partnership with Innovative Medicines Canada, at Benefits Canada’s 2017 Face-to-Face Drug Plan Management forum on Dec. 14.

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While the results indicate plan sponsors will see overall increases of 6.1 per cent annually until 2021, Millson explained that the total could have been even higher if it wasn’t for a new batch of generic medicines expected to hit the market in that period. He noted the overall 6.1 per cent increase “is largely driven by existing trends,” which include the increasing number of members covered by plans. The frequency of claims is also on the upswing nationwide, as well as the cost for each one.

“Generics will have a pretty good impact,” said Millson, noting the category will drive overall costs down by about 1.4 per cent per year. Those expected savings will almost entirely offset the additional costs associated with new drug entrants in the next five years, which Millison predicted would add less than 1.5 per cent to private plan budgets annually.

“It’s a little bit of a second increase in terms of generic savings,” Millson added. “In the last couple of years, we have found the generic entries haven’t generated that much savings, as compared to the era when blockbusters were coming off patent, but we’re starting to see that change a bit.”

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IQVIA puts its forecast together using its private drug plan database, tracking drug claims and expenditures by plans across the country, which together account for about 70 per cent of the total private market, and 85 per cent of the pay-direct industry.

For comparison, IQVIA data from the period between 2012 and 2016 indicated that drug plan spending grew by an average of 4.7 per cent each year. In 2016, the average annual cost per claimant across IQVIA’s database stood at $596.

However, Millson noted the forecast doesn’t account for confidential product listing agreements or the impact of Ontario’s move to cover youth under the age of 25 in the province. As a result, plan sponsors can expect to generate some additional savings.

Read more stories from the Face to Face Drug Plan Management Forum