Breaking down the cost drivers: Deep dive predicts 4.9% annual rise for drug plans

Understanding private plans’ past cost drivers can help to predict future growth rates in drug spending, according to Brad Millson, principal for health access and outcomes at IQVIA Inc.

With funding from Innovative Medicines Canada, IQVIA researchers gained insight into past and potential rates of growth in drug plan expenditures by studying the largest, national private drug plan claims database in Canada. The database covers about 70 per cent of private drug plan claims and captures 12 million active claimants.

“We looked purely at the drug cost, not any other cost in this data,” Millson told the crowd at the Face to Face Drug Plan Management forum in Vancouver on May 1. “We looked at private drug plan expenditures over time to see why spending is growing at the rate it’s been growing and then layered this knowledge onto the events we expect to happen in the future to help come up with a forecast for the next few years.”

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Over the period covering 2012-16, the growth in private drug plan spending averaged 4.7 per cent nationally year over year. Total drug plan growth peaked in 2015 at 6.6 per cent, partly in response to the launch of drugs for hepatitis C, said Millson. To get at what’s driving the average growth, IQVIA broke the analysis into four key categories: claimants, the cost of drugs, cost per claimant and claims. It analyzed each category to determine the overall contribution to growth.

Over the five-year period, the number of claimants grew by 2.1 per cent a year. The average an-nual cost per claimant was $596 in 2016, with a compound annual growth rate of 2.6 per cent. Meanwhile, the cost per claim rose by about 1.2 per cent a year, a finding that Millson linked to the movement to more expensive drugs. The number of claims per claimant also increased by 1.4 per cent. “So overall, about 75 per cent of growth in private drug plans is attributed to actual or-ganic utilization growth, and the other 25 per cent [is] due to a shift to more expensive drugs or a price increase in those drugs,” said Millson.

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In developing its predictions, IQVIA developed a baseline forecast for all drugs and then layered on events that are likely to occur in the future to in order to predict the impact on private drug plans. “Key events were selected as the most influential for driving growth and/or savings in coming years,” said Millson, noting the forecast considered the impact of new drug launches, in-creases in cost per claim, potential savings from new generic entries and the possibility of new biosimilar drugs. It also considered the recent implementation by the pan-Canadian Pharmaceuti-cal Alliance of new prices for a select number of generic drugs.

Based on the degree of impact expected from those events, IQVIA came up with an actual fore-cast for the next three years. If nothing changes, growth will likely remain at 4.7 per cent. But factoring in generic entrants (expected to save one per cent), biosimilars entries (an additional 0.4 per cent saving), increases in costs per claim (rising cost by 0.8 per cent) and the impact of new drugs (adding 0.9 per cent to costs) creates a final forecast of 4.9 per cent annual growth over the next three years. If assumptions around some of those events changed, Millson noted the forecast could vary from three per cent to 6.6 per cent.

Read more coverage from the 2018 Face to Face Drug Plan Management forum Vancouver.